Explain risk arbitrage

Q: Define beta risk

A: The portfolio beta is a measure of the portfolio’s volatility. It measures how the stock moves in…

Q: Explain the types of risk?

A: Introduction: There is a risk involved in any company decision, and in personal life decisions. In…

Q: Define stand-alone risk

A: Stand-alone risk:This refers to the risk linked with a single aspect of a firm or any particular…

Q: Define default risk

A: Default risk: It is the threat or risk of a bank taking on the plausibility that a borrower will not…

Q: What are risk assessments?

A: Risk assessment means identification of risk faced by a business organization that hampers it from…

Q: Risk management focuses on what?

A: Organizations assess the stakeholder’s responses as risks or opportunities which would affect the…

Q: Define Risk aversion

A: A risk averse saver is an investor who favors inferior returns with recognized risks somewhat than…

Q: Discuss how diversification reduces firm specific risk.

A: Diversification is investing money in many investments rather than a single investment. In…

Q: Explain what is risk decompositon

A: Risk is referred as the future uncertainty with reference to the deviation from an expected earnings…

Q: What is security Market Line (SML)? How it explains risk-return relationship? Explain different…

A: What is security Market Line (SML)? The security market line can be understood as a tool for…

Q: Explain Prepayment Patterns and Security Prices?

A: The lending process is subjected o interest rates changes which may trigger prepayment of the…

Q: Differentiate between (a) stand-alone risk and(b) risk in a portfolio context

A: Investors can categorize the risks in two types. One is diversifiable risk and other one is…

Q: Define . Slope of SML and its relationship to risk aversion

A: Introduction: SML refers to security market line, it is a line indicating the relationship between…

Q: Define within-firm risk

A: Within-firm risk: Corporate (within-firm) risk is a hazard identified with an individual business.…

Q: Differentiate between interest rate risk and reinvestmentrate risk.

A: The major representation of the interest rate risk is the differentiation in the bond market price…

Q: What is event risk?

A: Event risk is the likelihood of a sudden event adversely affecting an organization, industry, or…

Q: Define diversifiable risk

A: Diversifiable risk It is special to a given business or industry. Regularly known in the feeling of…

Q: quantitative risk analysis:

A: Quantitative risk analysis assess the risk associated with a particular monetary item.

Q: Describe Inherent Risk.

A: Definition:   Audit Planning: Audit planning is the first step in the auditing process. The auditor…

Q: Define reinvestment rate risk

A: Reinvestment means investing without withdrawing the benefits (or) interest from the fund so that it…

Q: What information would be required to compute the risk-asset ratio under Basle I?

A: The risk asset ratio (RAR) measures the amount of a bank's total regulatory capital in relation to…

Q: What is the difference between systematic risk and unsystematic risk? Give an example of each.

A: Risk: The possibility that the actual outcome in a situation will differ from the expected outcome…

Q: Explain political risk

A: Political risks are important to be considered because they have an impact on the profitability…

Q: Define fair value hedges.

A:

Q: Illustrate the method of investment risk: Investment?

A: Following are the methods of investment risk: Investment: Standard deviation: Standard deviation…

Q: Explain the Trade-Off between Risk and Reward?

A: The trade-off means to lose one thing to achieve another thing. For example An organization is…

Q: / Risk and Return

A: There are 3 things given in the question and asked for an explanation of only 1. Risk and Return…

Q: Market risk is referred to as: systematic risk. total risk. diversifiable risk. asset specific…

A: Market risk is the type of risk that affects the whole market. Market risk is not specific to a…

Q: How are total risk, nondiversifiable risk, and diversifiable risk related? Why is nondiversifiable…

A: Total risk is measured by the standard deviation of returns; it has two elements non-diversifiable…

Q: Calculate the risk neutral probability

A: Risk neutral probability = (er*Δt - d)/(u-d) r is risk free rate. Δt is time period between each…

Q: Which one of the following is the formula that explains the relationship between the expected return…

A: Beta captures the systematic risk of the security. There exists an important formula in financial…

Q: Define risk

A: Risk can be defined as whenever there are chances that the investments’ actual outcomes are…

Q: Provide a comprehensive definition of risk

A: Risk is described in financial terms as the probability that the actual gains of an event or…

Q: Is statistical arbitrage true arbitrage? Explain.

A: Statistical arbitrage refers to the strategy in which investor tries to make profit due to the…

Q: Explain risk premium

A: An investor investing in a risky asset would demand a greater interest rate to compensate for the…

Q: Define risk-free asset?

A: Risk-free means that anything which does not have any kind of risk associated with it. They are free…

Q: . risk B. risk management C.hed

A: Step 1   The process of detecting, analyzing, and managing corporate finances and profits is known…

Q: Explain relevant risk

A: Introduction: Risk can be characterised in terms of the uncertainty of future consequences resulting…

Q: Explain risk aversion

A: Introduction: Risk can be characterized in terms of the uncertainty of future consequences resulting…

Q: rive CAPM and explain the concept of systematic risk

A: Systematic Risk – These are market risks—that is, general perils of investing—that cannot be…

Q: Define risky event

A: Risk is the variability in expected return and the actual return. When the actual return is more…

Q: Define a risk event.

A: Risk Event:  When an event can cause losses to the company's stakeholders and investors due to…

Q: what is the risk-free rate (rf)?

A: Risk free rate is also called as treasury bill rate. This treasury bill rates are free from default…

Q: Define conditional value at risk (CVaR)

A: The question is based on the concept of conditional value at risk , it is a risk assessment process.…

Q: Provide one example of a calculation of risk and discuss its significance.

A: Risk is a chance that the actual gain or outcome from the investment will differ from the expected…

Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.