In theory, market risk should be the only “relevant” risk. However, companies focus asmuch on stand-alone risk as on market risk. What are the reasons for the focus on standalonerisk?

One approach for using multifactor models is to use factors that capture systematic risk. Which of the following is not a common factor used in this approach? Market capitalization O Unexpected changes in real GDP O Unexpected changes in inflation Yield curve shifts Consumer confidence

Why having a trading system is important? And why managing our risk is important?

Explain market risk and discuss why banks are subject to this risk. Discuss how banks manage this risk using Value at Risk (VaR) modelling and examine the limitations of this approach.

Risk and Return: Introduction Risk is an important concept affecting security prices and rates of return. Risk is the chance that some unfavorable event will occur, and there is a trade-off between risk and return. The higher an investment's risk, the-Select-the return required to induce investors to purchase the asset. This relationship between risk and return indicates that investors are risk ; investors dislike risk and require -Select- Vrates of return as an inducement to buy riskier securities. A represents the additional compensation investors require for bearing risk; it is the difference betweer the expected rate of return on a given risky asset and that on a less risky asset. An asset's risk can be considered in two ways: On a stand-alone basis and in a portfolio context. -Select- -Select-

Which of the following statements regarding the PE ratio is true? O A high PE ratio is indicative of a company with questionable future earnings. The higher the PE ratio the greater the risk. O A low PE ratio reflects a company with a strong financial future. O The lower the PE ratio the greater the risk.