Question

Explain why all risks cannot be hedged. Give an example of a risk that cannot be...

Explain why all risks cannot be hedged. Give an example of a risk that cannot
be hedged.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Major risks related to any firms are financial risk and operating risk. Hedging of risk means taking a counter position of the assets through different derivative products. For example, financial risk may arise interest cost of a firm may arise due to rise in interest rate. This can be hedged by interest rate swaps or derivatives. While operating risks are related to the firms business model. For example a firm deals in computer laptops motherboard. If a competitor launch a superior product the firm may face a loss. But this type of risk can not be hedged. So risks like operating risk can not be hedged all time.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Give three examples of risks that cannot be hedged.
Give three examples of risks that cannot be hedged.
Give three examples of risks that cannot be hedged.
Give three examples of risks that cannot be hedged.
Explain the difference between systematic and unsystematic risk, and why one of these types of risks...
Explain the difference between systematic and unsystematic risk, and why one of these types of risks is rewarded with a risk premium while the other type is not. Give some examples for systematic and unsystematic risk.
•Calculate the differences in cost and risk. Explain why the costs and risks of external financing...
•Calculate the differences in cost and risk. Explain why the costs and risks of external financing are important for the organization to understand.
what are some heart disorders that an ECG cannot pick up? give an example, and why...
what are some heart disorders that an ECG cannot pick up? give an example, and why can it not be detected?
Explain for each of the following risks: Financial Operational Strategic Hazard i) why the risk is...
Explain for each of the following risks: Financial Operational Strategic Hazard i) why the risk is a frequency and/ or severity concern to a College? ii) Best risk treatment technique(s) to address the risk
Explain quantitive easing also give an example of why this is a good policy then give...
Explain quantitive easing also give an example of why this is a good policy then give an example of why this could be a bad policy
Give an example of a consumption good and an example of an investment good. Explain why...
Give an example of a consumption good and an example of an investment good. Explain why the two are different, as a macroeconomist would think of them differently. Also, explain why investment is important for the long term health of an economy.
Can all risks be controlled? Explain why or why not providing three reasons to support your...
Can all risks be controlled? Explain why or why not providing three reasons to support your position. has to be 250 minimum
“A pooling arrangement, i.e., insurance, reduces risk for all the participants. Since almost everyone prefers lower...
“A pooling arrangement, i.e., insurance, reduces risk for all the participants. Since almost everyone prefers lower risk, we should have full insurance for all risks.” Give and explain three reasons why the previous statement is not likely to be true, i.e., why we would not likely observe full insurance for all risks.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT