How Do Firms Manage Financial Risk? (FRM Part 1 2020 – Book 1 – Chapter 2)

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The written summary can be found here:

After completing this reading you should be able to:
- Compare different strategies a firm can use to manage its risk exposures and explain situations in which a firm would want to use each strategy.
- Explain the relationship between risk appetite and a firm’s risk management decisions.
- Evaluate some advantages and disadvantages of hedging risk exposures and explain challenges that can arise when implementing a hedging strategy.
- Apply appropriate methods to hedge operational and financial risks, including pricing, foreign currency
and interest rate risk.
- Assess the impact of risk management tools and instruments, including risk limits and derivatives.

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