[...]... Association of Risk Professionals recognized this void and this book is their first attempt to fill in some of the blank spaces KPMG is pleased to the be the primary sponsor of GARP’s The Professional s Handbook of Financial Risk Management We believe that this volume offers the reader practical, real world insights into leading edge practices for the management of financial risk regardless of the size and... specified amount of a specified commodity – the underlying asset – to the other at a specified date in the future (the 8 The Professional s Handbook of Financial Risk Management maturity date of the contract) at a specified price (the forward price) The commodity may be a commodity in the narrow sense, e.g gold or wheat, or a financial asset, e.g foreign exchange or shares The price of the underlying asset... Risk Professionals, has brought together thousands of risk professionals and has enabled the sharing of ideas and knowledge throughout the risk community The existence of this forum has also made apparent that despite the growing size and importance of risk management in the financial world, there is no book in the marketplace that covers the wide array of topics that a risk manager can encounter on a daily... provide risk practitioners with knowledge of the practices that other risk professionals have employed at their own jobs This is especially important considering the evolving nature of risk management that can be characterized by the continuous refinement and improvement of risk management techniques, which have been driven by the increasingly complex financial environment One of the challenges of this... begins in the boardroom rather than the back of ce The risk management process and professionals are now recognized as not only protecting the organization against unexpected losses, but also fundamental to the efficient allocation of capital to optimize the returns on risk The professional risk manager, when properly supported and utilized, truly provides added value to the organization A number of risk. .. with the risk practitioner in mind While no undertaking of this size can be devoid of theory, especially considering the ongoing changes and advances within the profession itself, the heart of this book is aimed at providing practising risk managers with usable and sensible information that will assist them in their day-to-day work The successful growth of GARP, the Global Association of Risk Professionals,... decision xx The Professional s Handbook of Financial Risk Management This handbook has thus been designed to delve into the various roles of the risk management function Rather than describing every possible role in exhaustive detail, the authors have attempted to provide a story line for each of the discussed topics, including practical issues that a risk manager needs to consider when tackling the subject,... option combinations, risk reversals and strangles, by means of which the market ‘trades’ the smile 4 The Professional s Handbook of Financial Risk Management Behavior of asset prices Efficient markets hypothesis The efficient market approach to explaining asset prices views them as the present values of the income streams they generate Efficient market theory implies that all available information regarding... from the rest of business The term professional risk manager was virtually unheard of in all but the largest and most sophisticated organizations Only after a series of well-publicised losses and the accompanying failure of the firms involved did the need for sophisticated, proactive and comprehensive financial risk management processes become widely accepted The new world of the professional risk manager... published in the latter half of the 1990s They addressed the history of risk, how it evolved, the psychological factors that caused individuals to be good or bad risk takers and a myriad of other topics Unfortunately, few books were written on the proper management of the growing population and complexity of risks confronting institutions Marc Lore, Lev Borodovsky and their colleagues in the Global Association . The Professional s Handbook of Financial Risk Management The Professional s Handbook of Financial Risk Management Edited by Marc Lore and Lev Borodovsky Endorsed by the Global Association of. assist them in their day-to-day work. The successful growth of GARP, the Global Association of Risk Professionals, has brought together thousands of risk professionals and has enabled the sharing of ideas. and this book is their first attempt to fill in some of the blank spaces. KPMG is pleased to the be the primary sponsor of GARP’s The Professional s Handbook of Financial Risk Management. We believe