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Summary: 1/44
Chapter 7. Derivatives markets.
Manual for SOA Exam FM/CAS Exam 2.
Chapter 7. Derivatives markets.
Section 7.9. Risk Management.
c 2009. Miguel A. Arcones. All rights reserved.
Extract from:
"Arcones' Manual for the SOA Exam FM/CAS Exam 2,
Financial Mathematics. Fall 2009 Edition",
available at http://www.actexmadriver.com/
c 2009. Miguel A. Arcones. All rights reserved. Manual for SOA Exam FM/CAS Exam 2.
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Chapter 7. Derivatives markets. Section 7.9. Risk Management.
Risk Management
The main reasons why firms enter derivatives are: to hedge, to
speculate, and to reduce transactions costs. Managers use
derivatives taking in account their view of the market. So, a
speculative component is added to each decision.
Firms convert inputs, such a labor and raw materials, into goods
and services. A firm makes money if its income exceeds its costs.
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