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Risk Management for Non-Financial Corporations
Jan 1, 2010
Important issues that corporations face in measuring and managing their market risk include long-term horizons, risk reporting in periods, accounting rules, position aging, exposure modeling, and risk against budgeted levels. We describe a risk model that calculates Earnings-at-Risk and Cash-Flows-at-Risk for corporations in a way that addresses these concerns, and work through a detailed example. The market model we use also incorporates mean reversion and calibration to market prices.
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