16

APPLICATIONS FOR FINANCIAL ENGINEERING

16.1 Applications of financial engineering

16.2 Sources of financial risk

16.3 Accounting and economic risk

16.4 Defining hedging objectives

16.5 Measuring hedge efficiency

16.6 The finance division as a profit centre

This chapter sets out the main applications where financial engineering techniques may profitably be employed. One use in particular – hedging – is explored in greater depth, reviewing the sources of financial risk, setting hedging objectives and measuring hedge efficiency. A final section discusses whether a company’s finance division should act merely as a service for other parts of the company, or whether it should be counted as a profit centre in its own right.

16.1 Applications ...

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