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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