Risk Management Flashcards
1
Q
how to mitigate interest rate risk?
A
- forward agreements
- rate swaps
- matching duration of loan to asset
2
Q
how to mitigate refinancing risk?
A
spreading out maturities and sources of finance
3
Q
how to mitigate liquidity risk?
A
increasing cash on hand
4
Q
how to mitigate currency risk?
A
- forward contracts
- currency swaps
- natural hedging
5
Q
how to mitigate credit risk?
A
- keep track via age analysis
- using credit agencies
- avoid concentrated exposure
6
Q
how to mitigate commodity price risk?
A
- forwards / futures contracts / options (inputs only, do not hedge for outputs)
7
Q
how to mitigate inflation risk?
A
- focus on cost mgmt
- operate in low-inflation places
