The Contours of Financial Risk 3
As tools to model both market and credit risk have evolved, the contours of financial risk have emerged. The latest analytical tools cover all financial risks and start to model the complex interactions between them, through time. Examining the development of these tools against the backdrop of this risk spectrum provides a view of their power, limitations, and managerial implications.
FUNDING RISK—THE PRIMAL ARC
Funding risk is the primal arc. It is the risk that current obligations/liabilities cannot be met with current assets. It is primal because it deals with the solvency of the organization. It spans both market and credit risk by being inside the institution. The financial arm of all business organizations ...
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