RISK MANAGEMENT

IN DERIVATIVE
PRESENTED BY: MANEET KAUR, KUSUMI, PRIYANKA
 RISK MANAGEMENT

■ Risk Management is the practice of defining the risk level a firm desires, identifying the
risk level a firm currently has, and using financial instruments to adjust the actual level
of risk to the desired level of risk.

■ Risk Management is closely identified with the types of instruments that can be used to
manage risk.

■ Derivatives can be used in risk management to hedge a position, protecting against the
risk of an adverse move in an asset.
FEATURES OF RISK MANAGEMENT

■ Risk Permeates the Organization

■ Many Drivers to Strengthen the Function

■ Awareness Of Risk is the Key

■ Companies Create a Figurehead the Risk

■ Increase in Investment is Predicted

 TYPES OF RISK

1) Market Risk

2) Credit Risk

3) Operational Risk

4) Legal And Documentation Risk

5) Liquidity Risk
 RISK MANAGEMENT PROCESS

Risk Measurement

Limiting Risk

Reporting

Management Evaluation and Review

HEDGING USING - OPTION GREEKS

Option Greeks

Delta Gamma Theta Vega

 Value At Risk (VAR)
VaR is defined as a threshold value such that the

probabilitythat the mark- to market loss on

the portfolio over the given time horizon

exceeds this value is the given probability

level.