Flashcards in Part 3 - Insurance and Investment Risk Deck (5)
How can market risk be offset?
Market neutral: ARBITRAGE (take out all market risk using offsetting positions in different investments
Market netural: SECURITIES HEDGING (invest equally long and short in the same market sector to exploit mis-pricing)
What do Basel rules promote re: Investment risk?
Building capital that can be drawn down when the markets are becoming stressed
What is positive and negative alpha?
Positive = Over performance
Negative = Under performance
(risk adjusted return = actual return - expected return)
What do investment mandates do?
Set out the rules;
of how a portfolio will be managed