Explain risk-neutral valuation

Q: Define then discuss Value-at-Risk.

A: The stock market is full of new policies and procedures. It get impacted by change in the government…

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: isk can be separated into undiversifiable risk and diversifiable risk. Discuss the difference…

A: In market there are many types of risk involved but broadly there are two types of risk…

Q: Explain risk arbitrage

A: It is a venture system to benefit from the narrowing of a hole of the exchanging cost of an…

Q: Define the term Risk-free real return?

A: Risk-free real return is a hypothetical number that mirrors the foreseen return on a venture that…

Q: What is the significance of the Value at Risk (VaR) method?

A: The question is based on the concept of Value at Risk (VaR). VaR is a statistical measure of risk 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: 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: What is reinvestment rate risk?

A: The reinvestment rate risk is the potential decline in the interest income that tends to be a result…

Q: Define relevant risk

A: For investors, risks are classified into the following two types: Systematic risk/relevant…

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: Define the term Trade-Off between Risk and Reward?

A: Risk-Reward trade off refers to an investment principle which indicates higher the risk, higher is…

Q: Define net realization value?

A: Net realizable value means the amount that could be received after deducted all incidental expenses…

Q: Basic Elements of Risk-Adjusted Returns?

A: Introduction: Risk adjusted return is a methodology for calculating and evaluating the returns on an…

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: Explain the specific relationship between risk and reward and why this relationship must be true.

A: Risk refers to probability for loss of investment value by an investor whereas Reward refers to…

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: Describe relationship between risk and profitability.

A: Risk and profitability have direct relation. Lower the risk, lower is the return and Higher the…

Q: Explain about the Hedging against fair value risk.

A: Financial instrument:   It is a monetary contract between two parties which acts as an evidence of…

Q: Explain Comparing Risk Premiums?

A: Risk premium is additional premium an investor achieves by investing in a riskier financial…

Q: What are the methods of describing Project Risk?

A: The project risk is an unpredictable occurrence or situation that has an effect on at least one…

Q: (a) Define risk-free asset

A: An asset which generally having certain future returns and there is no chance of loss in return is…

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: Explain Broader Diversification Reduces Risk?

A: The investment in different financial assets is known as the portfolio of an investor. The…

Q: How to minimize or eliminate risk using diversification or other means.

A: Diversification is a process investment in multiple assets with the available amount.

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: Explain relevant risk

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

Q: what is opportunity risk

A: Opportunity risk is a the risk off loosing a better opportunity i.e. if you have invested in a…

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 underinvestment problem

A: Underinvestment refers to the situation where company or firm has insufficient investment or can…

Q: Why is it important to be able to quantify risk?

A: Risk is the chance that an outcome of an investment's actual gain will differ from an expected…

Q: Define a risk event.

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

Q: Illustrate the main factors of Project Risk?

A: The project risk is defined as the uncertain event or condition that occurs mainly on positive or…

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: What is value at risk, VaR?

A: Value at Risk (VaR) is a financial metric that estimates the risk of an investment. More…

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: How can we Consider Project Risk by Discount Rate?

A: In corporate finance, a discount rate is the rate of return used to discount future cash flows back…

Q: Define value at risk (VaR)

A: Risk is referred as uncertainty or loss. Financial risk is referred as the variability of actual…