Discussion in 'P1.T1. Foundations of Risk (20%)' started by cookies, Aug 7, 2012.
Is there a section that provides additional examples of 4 major types of risk?
not really, there is a practice question in the Jorion PQ PDF, but it's just a summary of Jorion's brief 1.1.2, so we don't go deeper than:
Human (Accident) including regulatory policy (and unintended consequence
Human (Deliberate) including terrorism and war
Natural disaster including earthquakes and hurricanes
Economic growth including the creative “disruption” caused by technological innovation
Oh sorry, i was thinking sources since you mentioned four. But i realize you probably mean Jorion's four types in chapter 1: market, liquidity, credit and operational.
Well, Jorion's four risk types are a preview of the rest of the FRM, so in a sense, it's all of the detail to follow!
The FRM, it is easy to forget (as i mention in the recent focus review P1.1 video), is generally concerned with non-business financial risks
... so FRM is not concerned with business risks (eg., strategy, technology)
... and FRM is not too greatly concerned with non-business, non-financial risks (eg., reputation, political)
But the FRM is all about the "big three" non-business financial risks: market (liquidity is typically slotted under market risk), credit and operational
... for example, pretty much all of the T4. John Hull derivatives constitutes "examples" of market (price) risk.
I hope that helps,
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