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    Financial Risk: By: Lyra Mae A. Emberga Bsa Iii

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    Mark Angelo Hasal Duana
    This document discusses the different types of financial risk that companies face. Financial risk arises from decisions to take on debt financing and instability in financial markets. There are four main types of financial risk: market risk from price movements, credit risk from defaulting on obligations, liquidity risk from inability to execute transactions, and operational risk from failures like fraud or technical issues. Each risk type is then defined in more detail with examples.

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    Financial Risk: By: Lyra Mae A. Emberga Bsa Iii

    Uploaded by

    Mark Angelo Hasal Duana
    26 views8 pages
    This document discusses the different types of financial risk that companies face. Financial risk arises from decisions to take on debt financing and instability in financial markets. There are four main types of financial risk: market risk from price movements, credit risk from defaulting on obligations, liquidity risk from inability to execute transactions, and operational risk from failures like fraud or technical issues. Each risk type is then defined in more detail with examples.

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    FINMAN 303

    Original Title

    Financial Risk

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    This document discusses the different types of financial risk that companies face. Financial risk arises from decisions to take on debt financing and instability in financial markets. There are four main types of financial risk: market risk from price movements, credit risk from defaulting on obligations, liquidity risk from inability to execute transactions, and operational risk from failures like fraud or technical issues. Each risk type is then defined in more detail with examples.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    26 views8 pages

    Financial Risk: By: Lyra Mae A. Emberga Bsa Iii

    Uploaded by

    Mark Angelo Hasal Duana
    This document discusses the different types of financial risk that companies face. Financial risk arises from decisions to take on debt financing and instability in financial markets. There are four main types of financial risk: market risk from price movements, credit risk from defaulting on obligations, liquidity risk from inability to execute transactions, and operational risk from failures like fraud or technical issues. Each risk type is then defined in more detail with examples.

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    You are on page 1of 8

    FINANCIAL RISK

    By: Lyra Mae A. Emberga


    BSA III
    FINANCIAL RISK
    • Is the additional risk placed on the ordinary equity
    shareholders as a result of the decision to finance debt.

    • Generally arises due to instability and losses in the


    financial market caused by movements in stock prices,
    currencies, interest rates and more
    TYPES OF FINANCIAL RISK

    • Market Risk
    • Credit Risk
    • Liquidity Risk
    • Operational Risk
    MARKET RISK

    • Arises due to movement in prices of financial


    instrument.

    • Directional Risk- caused due to movement in stock price,


    interest rates and more.
    • Non- Directional Risk – can be volatility risks.
    CREDIT RISK

    • Arises when one fails to fulfill their obligations


    towards their counter parties.
    • Sovereign Risk- arises due to difficult foreign exchange
    policies.
    • Settlement Risk- arises when one party makes the payment
    while the other party fails to fulfill the obligations.
    LIQUIDITY RISK

    • Arises out inability to execute transactions.

    • Asset Liquidity Risk – arises either due to insufficient buyers or


    insufficient sellers against sell orders and buy orders respectively.
    • Funding Liquidity Risk- risk of not having access to sufficient
    funds to make payment on time.
    OPERATIONAL RISK

    • Arises out of operational failures such as


    mismanagement or technical failures.

    • Fraud Risk- arises due to lack of controls.


    • Model Risk- arises due to incorrect model application.
    • Legal Risk- arises out of constraints such as lawsuits.
    THANK YOU !

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