金融学教学课件bodie2e_chapter10

1、copyright 2009 pearson education, inc. publishing as prentice hall1chapter 10: principles of risk managementobjectiverisk and financial decision makingconceptual framework for risk managementefficient allocation of risk-bearingcopyright 2009 pearson education, inc. publishing as prentice hall2conten

2、ts10.1 what is risk?10.2 risk and economic decisions10.3 the risk-management process10.4 the three dimensions of risk transfer10.5 risk transfer and economic efficiency10.6 institutions for risk management10.7 portfolio theory: quantitative analysis for optimal risk management10.8 probability distri

3、butions of returns10.9 standard deviation as a measure of riskrisk management:qualitativerisk management:quantitativecopyright 2009 pearson education, inc. publishing as prentice hall310.1 what is risk? uncertaintycopyright 2009 pearson education, inc. publishing as prentice hall4what is risk? uncer

4、tainty that matters risk is uncertainty that “matters”, because it affects peoples welfare. uncertainty is a necessary but not sufficient condition for risk. e.g.: you manage “the intergalactic herrings” and have a choice between two contracts for the concert hallcopyright 2009 pearson education, in

5、c. publishing as prentice hall5contractual outcomes “ticket sales” is the “risk that matters” copyright 2009 pearson education, inc. publishing as prentice hall6naming the strategies: research the first strategy is purchasing information by researchcopyright 2009 pearson education, inc. publishing a

6、s prentice hall7naming the strategies: insurance or option the second strategy entails purchasing the right to make a choice before a specified timecopyright 2009 pearson education, inc. publishing as prentice hall8naming the strategies: hedging the third strategy creates secondary contracts that re

7、duce overall exposure to the risk created by the primary contractcopyright 2009 pearson education, inc. publishing as prentice hall9risk aversion herrings ultimate contracting strategy will depend upon its level of risk aversioncopyright 2009 pearson education, inc. publishing as prentice hall10upsi

8、de-downside herring has a choice of contracts, and each has an and a depending on the variable that controls the “risk that matters” upside: favorable outcome downside : unfavorable outcome people normally consider the downside to be the risk, but theoretically both sides are risks.copyright 2009 pe

9、arson education, inc. publishing as prentice hall11both upside and downside some risks are more complex. a computer mother-board manufacturer that underestimates demand will lose current sales and market share overestimates demand will own an inventory with a market price that is being eroded by rap

10、id technological obsolescence deviation is unfavorablecopyright 2009 pearson education, inc. publishing as prentice hall12reduce risk: knowing when to purchase information but copyright 2009 pearson education, inc. publishing as prentice hall13reduce risk: tailor the contract but copyright 2009 pear

11、son education, inc. publishing as prentice hall14reduce risk: looking back but copyright 2009 pearson education, inc. publishing as prentice hall15risk exposure if you face a particular kind of risk because of the nature of your job, business, or pattern of consumption you have a particular copyrigh

12、t 2009 pearson education, inc. publishing as prentice hall16risk-controlling tools many tools that may be used to reduce risk may also be used to increase riskcopyright 2009 pearson education, inc. publishing as prentice hall1710.2 risk and economic decisions some financial decisions, such as how mu

13、ch insurance to buy against various risk exposures, related exclusively to the management of risk. many general resource allocation decisions, such as saving, investment and financing decisions, are also significantly influenced by the presence of risk, and therefore partly risk-management decisions

14、.copyright 2009 pearson education, inc. publishing as prentice hall18risk exposure of households sickness, disability, & death risks unemployment risk consumer-durable asset risk liability risk financial asset riskcopyright 2009 pearson education, inc. publishing as prentice hall19risk exposure

15、of firmsinput/output channels strike, boycott, embargo, war, safety, supply/ demandloss of production facilities fire, legislation, civil action, strike, nationalization, warliability risk customer, employee, community , environmentprice risks input, output, foreign exchange, interestcompetitor risk

16、 technology, intellectual property, economiccopyright 2009 pearson education, inc. publishing as prentice hall20government: major calamities weather, forest fires, riotscopyright 2009 pearson education, inc. publishing as prentice hall2110.3 the risk-management process risk identification risk asses

17、sment selection of risk-management techniques implementation reviewcopyright 2009 pearson education, inc. publishing as prentice hall22risk identificationrisk identification consists of figuring out what the most important risk exposures are for the unit of analysis.households or firms are sometimes

18、 not aware of all of the risks to which they are exposed:copyright 2009 pearson education, inc. publishing as prentice hall23copyright 2009 pearson education, inc. publishing as prentice hall24risk assessment the quantification of the identified riskscopyright 2009 pearson education, inc. publishing

19、 as prentice hall25selection of risk-management techniquesrisk avoidance: a conscious decision not to be exposed to a particular risk. but some risk you just cannot avoid, like illness.loss prevention and control: actions taken to reduce the likelihood or the severity of losses, which could be taken

20、 prior to, concurrent with, or after loss occurs.risk retention: absorbing the risk and covering losses out of ones own resources.risk transfer: transferring the risk to otherscopyright 2009 pearson education, inc. publishing as prentice hall26implementation risk transfer requires finding a suitable

21、 transfer vehicle at an acceptable pricecopyright 2009 pearson education, inc. publishing as prentice hall27implementation some risks may be shed only imperfectlycopyright 2009 pearson education, inc. publishing as prentice hall28review management of risk should be an ongoing systematic activity bec

22、ause risk exposure changes as people mature maintaining flexibility will enable you to react more appropriately to changecopyright 2009 pearson education, inc. publishing as prentice hall2910.4 the three dimensions of risk transfer hedging insuring diversifyingcopyright 2009 pearson education, inc.

23、publishing as prentice hall30hedging a risk is hedged when the action taken to reduce adverse risk exposure also causes the loss of unexpected gaincopyright 2009 pearson education, inc. publishing as prentice hall31insuring insuring is the payment of a premium to avoid losses insurance is not hedgin

24、g because you maintain ownership in the upside potentialcopyright 2009 pearson education, inc. publishing as prentice hall32hedge vs. insurance hedge: forward contracts a forward contract is an agreement to buy or sell an asset (commodity, currency, stock or stock index) at a certain time in the fut

25、ure for a certain price (the delivery price)copyright 2009 pearson education, inc. publishing as prentice hall33example (difference between hedge and insurance) a us company will pay 10 million for imports from britain in 3 months (aug. to nov.) and decides to hedge using a long position in a forwar

26、d contract an investor owns 1,000 microsoft shares currently worth $73 per share. a two-month put with a strike price of $65 costs $2.50. the investor decides to hedge by buying 10 contracts. here the word “hedge” actually means “insure”, because the investor maintains ownership in the upside potent

27、ial.copyright 2009 pearson education, inc. publishing as prentice hall34diversifying diversification means holding similar amounts of many risky assets instead of a larger amount of a single risky assetcopyright 2009 pearson education, inc. publishing as prentice hall35standard deviations of portfol

28、ios 0.130.140.150.160.170.180.190.20012345678910portfolio size standare deviation s = 0.2000s = 0.1421s* = 0.1342theoretical minimumcopyright 2009 pearson education, inc. publishing as prentice hall3610.5 risk transfer and economic efficiency risk transfer helps to fulfill economic efficiency in two

29、 ways:copyright 2009 pearson education, inc. publishing as prentice hall3710.6 institutions for risk management a complete market for allocating risk would permit the separation of productive activity and risk-bearing while technology is driving the risk market-place towards completeness, this will

30、not be achieved because:copyright 2009 pearson education, inc. publishing as prentice hall3810.7 portfolio theory: quantitative analysis for optimal risk management applying portfolio theory consists of formulating and evaluating the trade-offs between the benefits and costs of risk reduction in ord

31、er to find an optimal course of action. for households, consumption and risk preferences are exogenous, and portfolio theory addresses the problem of how to choose among financial alternatives so as to maximize their given preference.copyright 2009 pearson education, inc. publishing as prentice hall

32、39h in general, the optimal choice involves evaluating the trade-off between receiving a higher expected return and taking greater risk; however, it is sometimes possible to devise a strategy that reduces the risk of all contracting parties, while no cost occurs other than the expense of drawing up

33、the contract.copyright 2009 pearson education, inc. publishing as prentice hall40m theres a trade-off between the costs and benefits of risk reduction. this trade-off is most apparent when households decide how to allocate their wealth among assets categories, such as bonds, stocks and real estates.

34、 portfolio theory is to solve this kind of problems. it uses probability distributions to quantify the trade-off between risk and expected return.copyright 2009 pearson education, inc. publishing as prentice hall4110.8 probability distributions of returns assume that there are two stock available, g

35、enco and risco, and each responds to the state of the economy according to the following tablecopyright 2009 pearson education, inc. publishing as prentice hall42returns on genco & riscostate ofeconomyreturn onriscoreturn ongencoprob-abilitystrong50%30%0.20normal10%10%0.60weak-30%-10%0.20copyrig

36、ht 2009 pearson education, inc. publishing as prentice hall43tniiirpre1)(%1020. 0%)10(60. 0%1020. 0%30)(gencore%1020. 0%)30(60. 0%1020. 0%50)(riscorecopyright 2009 pearson education, inc. publishing as prentice hall44probability distribution of returns for gencocopyright 2009 pearson education, inc.

37、 publishing as prentice hall4550%30%10%-10%-30%riscogenco00.10.20.30.40.50.6probabilityreturnprobability distributions of returns of genco and riscocopyright 2009 pearson education, inc. publishing as prentice hall46observation both companies have the same expected return, but there is considerably

38、more risk associated with riscocopyright 2009 pearson education, inc. publishing as prentice hall4710.9 standard deviation as a measure of risk 2530. 0: also1265. 0016. 0)10. 010. 0(2 . 010. 010. 06 . 010. 030. 02 . 0.2221222222112riscogencogencorrrniriirnnrrrrprprprpreresssscopyright 2009 pearson education, inc. publishing as prentice hall48observation the expected returns of genco and risco happen to be equal, but the volatility, or stand