Dynamic Risk Management: Theory and Evidence
- Topics:
- Strategic Planning and Analysis
- Tags:
- Finance,
- Financial Planning,
- Financial Services,
- Management,
- Risk Management,
- Risk Management Instrument,
- Security,
- Strategy,
- Theory
- Source:
- University of Michigan
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Overview: This article is about on one business strategy known as "risk management". It present and tests an infinite horizon, continuous time model of a firm that can dynamically adjust the use and maturity of risk management instruments whose purpose is to reduce product price uncertainty thereby mitigating financial distress losses. The dynamic setting relaxes several restricting assumptions common to static models. It specifies few things as 1) the firm can adjust its use of risk management instruments over time, 2) risk management instruments expire as time progresses and that the available maturity of the risk management instruments is shorter than the life time of the firm, and 3) there are transaction costs associated with initiation and adjustment of risk management contracts.
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Format: PDF | Size: 471KB | Date: Feb 2003 | Pages: 52
