Classic Risk Exposure: Risk Management & Assessment

This article contains details and info about Classic Risk Exposure, Risk Analysis, Operational Risk and Risk Managment and Assessment.
We list below the various topics and sub-topics which a Risk Professional should be aware of. Given the recent problems in the various financial markets across the globe, the word Risk has become a primary item of ivestigation. How and from what all sources risk can come in, what all problems can lead to risk and how Effective Risk Management techniques and Risk Assessment methods be used to mitigate risk - are some of the topics that are a must to be covered in any Risk related course.

 --Default/ Failed Counterparty Risk:: This is a typical case when an outstanding Payment which is Due from a particular entity or party is not Made at all or not made on time.

 --Market Risk :- The typical case with a particular market fall - like Collapse of Greece Financial system

 --Liquidity Risk :- The case of not being able to change or sell your assets easily and get cash for it

 --Sovereign Risk/Force Majeure :- Related to Market risk, as well as poilitcal or regional risk.

 --Reputation Risk :- The problems with a reputation of a company can bring it down. For e.g. Cadbury sales were hit drastically in South Asia when an insect was found in one of its chocolate. Same happened with Pepsi when there were news that the pesticide content is huge in its drinks.

 --Violating the 5 C's of Credit Extension Risk: The C's - what they are and how they are impacted.

 --Moral Hazard Risk :- Power to someone not eligible to take decision, putting entire work, reputation at stake

 --Over leverage Risk : - Leverage is tied to the assets being financed

 --OPM- Other People's Money:/ The typical case of Mutual Funds and Portfolio Services. I manage your money. If we make money, I keep the lion's share, I we loose money, you are the looser.

 --FX Risk : Multinational Corps facing the risk of forec transactions. A good article on Forex Risk and Hedging

 --Risk due to Failure of Governance : Typical case of Greece Economy failure and also Iceland

 --Political Risk : No clear mandate for government, causes a lot of financial instability

 --Misused Moral Suasion Risk :

Fixed Income Securities Market & Credit Risk Valuations

In our previous article, we had mentioned about Fixed Income Securities Market: Introduction, Example, Market & Other Factors. In this article, we will discuss about Fixed Income Mathematics, Valuations topics of Bonds or Fixed Income Securities, Calculations for Fixed Income Securities and how the market for Fixed Income Securities works?, but the focus will be more of credit market-related topics.
Let's start with the fundamentals:

Issuance Or Origination (Creation) Of Debt Securities Fixed Income Securities: the process of issuance of Fixed Income Securities, underwriters distributors and all the parties involved.

 --Underwriting/Distribution of New Issue

 --Pricing (Setting the Offering Yields) of New Issues

Market Pricing Of Credit The Treasury Yield Curve And Credit Or Sector Spreads Fixed Income Securities:

 --Yield Curves and how they are used to price Fixed Income Securities

 --Yield Curves Theory and usages in Fixed Income Securities

 --The Fed (Federal Reserve System) and Interest Rates and how the risk free rate affects the pricing and trading of Fixed Income Securities

Credit Risk: Measurement, Mitigation And Investment Considerations Fixed Income Securities:

 --Measuring or Quantifying Credit (Default) Risk

 --Use and significance of Credit Ratings

 --How to Mitigate or Minimize the Credit Risk

 --Penny Stocks vis a vis Junk bonds - Features of so called High Yield Securities

Bond Prices And Yields Fixed Income Securities:

 --Bond Quotations and how to read and understand them

 --Bond Prices

Quantifying And Managing Interest Rate (Price) Risk Fixed Income Securities:

 --Yield to Maturity (YTM): Factors Determining Sensitivity of Price to Change in YTM

 --Quantifying Price Sensitivity to Changes In Market Yields

 --Callable Bonds

 --Applications of duration

Debt Retirement Bond Redemptions Fixed Income Securities:

 --Scheduled repayment of principal

 --Early Retirement Of Principal

 --Other Debt Retirement-Related Issues