📚 node [[financial risk management solution costs standardisation and time]]
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garden/KGBicheno/Economics/Financial risk management solution costs - Standardisation and time.md by @KGBicheno
Financial risk management solution costs - Standardisation and time
Go back to the [[Risk Management Main Page]]
Four critical factors impact the price of risk management solutions.
- Stardardisation
- Time
- Liquidity
- Market Volatitlity
For the second half see [[Liquidity and Volatility]]
Most commonly hedged prices are:
- interest rates
- currency rates
- commodity rates
The the prices of the instruments for hedging them:
- Options
- Swaps
- Futures
- Forwards
Are dependent on theL
- How standard the markets are
- How long you need that instrument in place
- How liquid those markets are
- How volatile those markets are
Standardisation
How common the requirements for risk management are
Basis Risk
- Product
- Timing
- Geography
Time
The time until risk management contracts expire. Cheaper the the closer to expiration.
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