4.5.1 Risk & Uncertainty
Risk is quantifiable uncertainty is not
Risk that ROI will be less
Market Imposes risk to influence economic factors
o Exhange rates
o Interest rates
Uncertainty considers situations that may or may not happen with an unknown outcome
Impact of shocks
Unforeseen changes which impact economies
Caused by humans or natural disasters
2008 financial crisis
o Risk taken by bank
Exchange rate risk and forward markets
Currency market used to trade one currency for another
Currencies have effect on markets
Commodity markets investors trade primary products such as wheat, gold and oil.
A forward market is an informal financial market where these contracts for future delivery are
made
The Role of insurance in business
The transfer of risk
Designed to reduce risk
People pay the insurance companies a premium to transfer the risk.
Help them protection
Risk is quantifiable uncertainty is not
Risk that ROI will be less
Market Imposes risk to influence economic factors
o Exhange rates
o Interest rates
Uncertainty considers situations that may or may not happen with an unknown outcome
Impact of shocks
Unforeseen changes which impact economies
Caused by humans or natural disasters
2008 financial crisis
o Risk taken by bank
Exchange rate risk and forward markets
Currency market used to trade one currency for another
Currencies have effect on markets
Commodity markets investors trade primary products such as wheat, gold and oil.
A forward market is an informal financial market where these contracts for future delivery are
made
The Role of insurance in business
The transfer of risk
Designed to reduce risk
People pay the insurance companies a premium to transfer the risk.
Help them protection
