Financial Risks
To estimate a role of a stock exchange in insurance of risks, we shall define their basic kinds. As is known, the financial risk as those is reflection of uncertainty and the unpredictability of results of activity caused by changes of the prices for the goods, rates of exchange, interest rates, and also political decisions. In this connection it is possible to allocate:
Risk of the party under the transaction. This risk for creditors acts in the form of risk of the borrower, for suppliers of the goods - in the form of risk payless, for buyers - in the form of risk of non-delivery;
Risk of the interest rate. The percentage risk for the borrower arises owing to possible falling the market interest rate on the involved resources that entails increase of cost of the loan. The percentage risk for the creditor arises because of possible growth of the market interest rate on the placed monetary resources, consequence of that is reduction of the percentage income of operation;
Price risk which is expressed in an opportunity of adverse change of the prices in the future. For buyers of the goods it is a question of possible falling the prices in comparison with a today's level, whereas for sellers - on the contrary;
Currency risk. The currency risk is a risk of revaluation of national currency in which the economic result of activity is estimated. As a subject of currency risk own means and profit of the economic agent serve;
Risk of liquidity. Involving extra means, the enterprise always faces to risk to appear unable to satisfy requirements of creditors and to find out the insolvency. In it the risk of liquidity is expressed, its size is defined by structure of passives and actives of the enterprise;
System risk. This risk named also country, consists that at adverse political, economic and legislative changes the investor can lose both the income, and the capital. The risk is defined first of all by a condition of economy, the size of a public debt and political stability in the country. The system risk, as well as risk of the borrower, is estimated by means of system of the international ratings (ratings of agencies Standard both Poor's and Moody's), appropriated in case of an estimation of system risk to the governments. However not all the governments have this rating. Russia where the system risk is very high and remains to those in the near future, only recently has received low enough rating. The estimation of this risk in the internal and world financial markets is reflected in the low price and high profitableness of the Russian state securities in US dollars (spread under the Russian eurobonds in relation to T-bonds makes about 400 basic items), and also in higher level of profitability in a home market in comparison with world. However the internal investor with the limited opportunities international diversification an investment portfolio first of all should concentrate on how to operate means in a home market.
The system of relationships of cause and effect in economy transforms one kind of risk to another. As an example the oil market where dynamics of the prices in many respects is defined by political decisions of the countries-exporters can serve. Thus, oil futures quoted in the advanced industrial countries are futures for a condition of the international attitudes between the advanced industrial countries and the countries - exporters of oil, transforming political risk in price.
Transformation of political risk in currency occurs in the Russian currency market where the basic operator is the Central bank. Dynamics of a rate of exchange depends on its actions and from political decisions of the government and, hence, the future currency market.
Risk of the party under the transaction. This risk for creditors acts in the form of risk of the borrower, for suppliers of the goods - in the form of risk payless, for buyers - in the form of risk of non-delivery;
Risk of the interest rate. The percentage risk for the borrower arises owing to possible falling the market interest rate on the involved resources that entails increase of cost of the loan. The percentage risk for the creditor arises because of possible growth of the market interest rate on the placed monetary resources, consequence of that is reduction of the percentage income of operation;
Price risk which is expressed in an opportunity of adverse change of the prices in the future. For buyers of the goods it is a question of possible falling the prices in comparison with a today's level, whereas for sellers - on the contrary;
Currency risk. The currency risk is a risk of revaluation of national currency in which the economic result of activity is estimated. As a subject of currency risk own means and profit of the economic agent serve;
Risk of liquidity. Involving extra means, the enterprise always faces to risk to appear unable to satisfy requirements of creditors and to find out the insolvency. In it the risk of liquidity is expressed, its size is defined by structure of passives and actives of the enterprise;
System risk. This risk named also country, consists that at adverse political, economic and legislative changes the investor can lose both the income, and the capital. The risk is defined first of all by a condition of economy, the size of a public debt and political stability in the country. The system risk, as well as risk of the borrower, is estimated by means of system of the international ratings (ratings of agencies Standard both Poor's and Moody's), appropriated in case of an estimation of system risk to the governments. However not all the governments have this rating. Russia where the system risk is very high and remains to those in the near future, only recently has received low enough rating. The estimation of this risk in the internal and world financial markets is reflected in the low price and high profitableness of the Russian state securities in US dollars (spread under the Russian eurobonds in relation to T-bonds makes about 400 basic items), and also in higher level of profitability in a home market in comparison with world. However the internal investor with the limited opportunities international diversification an investment portfolio first of all should concentrate on how to operate means in a home market.
The system of relationships of cause and effect in economy transforms one kind of risk to another. As an example the oil market where dynamics of the prices in many respects is defined by political decisions of the countries-exporters can serve. Thus, oil futures quoted in the advanced industrial countries are futures for a condition of the international attitudes between the advanced industrial countries and the countries - exporters of oil, transforming political risk in price.
Transformation of political risk in currency occurs in the Russian currency market where the basic operator is the Central bank. Dynamics of a rate of exchange depends on its actions and from political decisions of the government and, hence, the future currency market.
posted by alexsakne at 1:12 PM
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