Chapter 5: The Financial Risk Management Environment

Before we begin to look at the details of how to manage financial risk, we need to set the story in its proper perspective. So let us next take a look at the environment in which risk management is practiced. Of course, that environment can be viewed as the entire global economy and in particular, the global financial and commodity markets. Inasmuch as the practice of risk management relies heavily on the use of derivatives, we need to examine the basic structure and special characteristics of the derivatives markets…