MGD426H5 Lecture Notes - Lecture 3: Financial Risk, Systematic Risk, Risk Appetite
11 May 2020
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Document Summary
If unexpected events lead to one or more companies facing a drop in their stock price, investor a experiences a loss. Based on similar unexpected events, they would experience 10 times the loss (10xk). Investor b involves more of which risk: guessed answer: non-systematic because if they diversified their stock the risk wouldn"t be as great, types of market risk, currency price risk. Impacts organizations having operations in more than one country: results from changes in currency exchange rates, use hedging to limit effects, to avoid currency price risk, adapt production capacity around the world and procure locally, ex. Teck: sales denominated in usd, significant portion of expenses in local currencies, namely cad and chilean. Peso: foreign exchange fluctuations can have a significant effect on operating margins, unless offset by related changes to commodity prices, any foreign exchange gains or losses fro.
