4 major types of risk

Discussion in 'P1.T1. Foundations of Risk (20%)' started by cookies, Aug 7, 2012.

  1. cookies

    cookies New Member

    Is there a section that provides additional examples of 4 major types of risk?

    Thank you
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  2. David Harper CFA FRM

    David Harper CFA FRM David Harper CFA FRM (test) Staff Member


    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
  3. David Harper CFA FRM

    David Harper CFA FRM David Harper CFA FRM (test) Staff Member

    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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