Swaps and Futures Flashcards
(7 cards)
1
Q
what are the 7 major categories of risk
A
Strategy and reputation
control and compliance
hazards
human resources
operations
technology
financial management
2
Q
what are some ways of minimizing risk exposure
A
avoid activities that give rise to risk
buy insurance
transfer risky functions to third parties
share risk with third parties
3
Q
Who has a long position
A
the party that has agreed to buy
4
Q
who has a short position
A
the party that has agreed to sell
5
Q
what is the purpose of hedging
A
to reduce risk - NOT generate higher profits
6
Q
when do you do a long future hedge
A
when you know you will purchase an asset in the future and want to lock in the price
7
Q
when do you do a short future hedge
A
when you know you will sell an asset in the future and want to lock in the price
