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Financial Risk Management

In: Enterprise Risk Management in Finance

Author

Listed:
  • Desheng Dash Wu

    (Stockholm University
    University of Toronto)

  • David L. Olson

    (University of Nebraska)

Abstract

Traditional risk management focuses on risks stemming from physical or legal causes such as natural disasters or fires, accidents, death and lawsuits. Financial risk management deals with risks that can be managed using traded financial instruments. The events of the 21st century have made it even more critical. Top business management came under suspicion after the scandals at ENRON, WorldCom, and other business entities. In recent times, many investors have experienced difficulties from bubbles. The most spectacular failure in the late 20th century was probably that of Long-Term Capital Management,1 but that was only a precursor to the more comprehensive failure of technology firms during the dotcom bubble around 2001. The global financial community suffered the 2007 subprime crisis of the banking industry, the Fannie Mae and Freddie Mac crisis in secondary US mortgage markets, Lehman Brothers’ failure, Merrill Lynch’s takeover by Bank of America, and industry-giant AIG applying for emergency financial support from the Federal Reserve. The financial world’s failures include the Barings Bank collapse in 1995, as well as the Long-Term Capital Management and subprime mortgage bubble implosion already mentioned.

Suggested Citation

  • Desheng Dash Wu & David L. Olson, 2015. "Financial Risk Management," Palgrave Macmillan Books, in: Enterprise Risk Management in Finance, chapter 3, pages 15-22, Palgrave Macmillan.
  • Handle: RePEc:pal:palchp:978-1-137-46629-7_3
    DOI: 10.1057/9781137466297_3
    as

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    Cited by:

    1. Sisimonda Kinya Mwanja, 2021. "Effect of operational and market risk exposures on financial performance of DT-Saccos in Kenya," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(5), pages 107-118, July.

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