RISK HANDLING TECHNIQUES:DIVERSIFICATION AND HEDGING
After studying this chapter, you should be able to
■ Describe and identify several risk-bearing financial institutions.
■ Calculate the covariance and correlation between two exposure units.
■ Calculate the expected value, variance, and standard deviation for a portfolio consisting of a group of exposure units.
■ Describe the risk management services provided by risk-bearing financial institutions to their customers.
■ Describe how firms can use hedging to handle several types of speculative risk.
■ Describe how viewing risk in a portfolio context can result in improved risk management decisions.
