Questions tagged [risk-management]

Risk management is the process of identification, analysis and acceptance or mitigation of uncertainty in investment decisions.

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1answer
46 views

Forward contract hedge and market-maker

Referring to Mcdonald's "Derivatives markets" book, a market-maker or arbitrageur must be able to offset the risk of a forward contract. It is possible to do this by creating a synthetic forward ...
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2k views

Forex vs day trading for beginner investor

In essence, for a person that has not had any real experience with either (except for playing around in simulators like investopedia): which one would an individual have the most potential to ...
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41 views

Options trade - statistically expected return calculation?

I also asked this question here, for it to get more visibility. I am calculating expected return for composite option strategies based on event probabilities provided by the broker. For example, ...
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3answers
237 views

Should we consider real estate investment low, middle or high risk?

Should private investors investing in a specific (that is, not through some fund) real estate treat it as low, middle or high risk? Issues I consider: It's true that things move slowly in real ...
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3answers
256 views

Best way to cash-out for passive income

First, my investing knowledge is very limited (still new to this, still learning). Second, my question is somewhat unfocused, sorry about that but I hope that there is a somewhat concrete answer, ...
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1answer
117 views

U.S. 10 year treasury bonds behavior during crisis

It's often advised to buy and keep government bond to protect ourselves against the next upcoming crisis. (For example, in a defensive stock portfolio you can have 50% of stock and maybe 30% of ...
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2answers
128 views

Risk management strategies for ETF portfolio

I have an ETF portfolio (MSCI World, Euro Stoxx 600) and I'm following a "buy and hold" strategy. But I would also like to learn more about risk management strategies. More precisely, I'd like to ...
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1answer
201 views

What kinds of ETFs weathered well the 2008-2009 financial crisis?

I started to do research on which ETFs kept or increased their value over a recession in 2008-2009. I saw a lot of articles which says "invest in X, because X is always in demand (even in crisis)." X ...
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2answers
590 views

Should I have more than one brokerage account?

I have my brokerage business with one particular well-known US brokerage house. I find being able to access my retirement accounts and personal investment accounts through the one interface useful. ...
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6answers
371 views

Rational risk-assessment decision framework: Should I buy health insurance?

Update: I've posted a sub-question on the math stack exchange to help answer part of this primary question. Sub-question: Toy problem: How much should I rationally be willing to pay for this ...
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1answer
98 views

Is the issuer of an ETF a risk to consider?

When it comes the price of an ETF, I understand that it reflects the value of the underlying assets. What happens where a company that issues ETF comes into play on the decision of people whether to ...
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1answer
98 views

How often do regular businesses hedge their economic risks?

It's claimed that derivative instruments were made to allow real businesses to hedge their risks (unpredictable increase of supplies price, decrease price of the product in the future and so on, ...
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1answer
55 views

What are the ways to price a holding company?

I would like to know how people value holding companies. I guess the most famous one is Berkshire ($BRK.A - $BRK.B). And others exist. These holdings usually have a lot of exposure to realestate, PE ...
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913 views

Worried about wife's spending habits with impending lump sum

My wife of 18 years has a problem with money. She has stolen from banks using my identity, falsified documents to get cars, and has been to prison over it. I pay for everything and give her ...
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2answers
614 views

Break Even On Options Contracts

Given a calendar options contract (sold 1 month out, bought 2 months out same strike price) and someone says to look to adjust/close out the position at the break even points. Do they mean break even ...
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1answer
184 views

How can I defend my wealth from targeted attacks?

The more money I save the more paranoid I become about it. I have two concerns: Someone I argued with years ago sues me to squeeze out some money from me. The government itself wants to take my ...
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107 views

Setting and measuring risk profile target for retirement account

I understand that as you age you want to slowly lower the risk profile of your retirement account, but how should I determine how much risk I should take on currently and how do I measure how much ...
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1answer
475 views

How can I combine winrate, (risk/reward), and expectancy into a single formula?

winrate = wins / (wins + losses) I fiddled around with it and found that: requiredWinrate = risk / (reward + risk) Expectancy formula expectancy = (winProbability x averageWin) - (lossProbability ...
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How can I protect my 401(k) when the stock market is performing badly?

I just opened my 401(k) at the beginning of 2017. In 2017 it did great because of the bull market, but since 2018 I've lost about $1,000. All of my contributions this year have been a complete waste. ...
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3answers
539 views

How can I calculate the volatility(standard deviation) of a stock price? and/or ROI (return on investment) of a stock?

I'm trying to build my first portfolio, I've already have set out my monetary goals, graded my risk tolerance and determined the asset allocation I wanted to go with. So, now for the next step I need ...
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1answer
75 views

Which market orders to meet this recommendation : 'Take a position on the purchase of the fooBar share, protect your capital by placing a stop'

I'm just getting started in the process of learning how to trade. I just wanted to know how should I interprete the following sentence : "Active investors will take a position on the SYNERGY share ...
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549 views

Finding Uncorrelated Assets

I own a particular security. How can I find another security, which has uncorrelated or negatively correlated (anti correlated) returns with the one I already own? I would like both securities to ...
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6answers
2k views

For a mortgage down-payment, what percentage is sensible?

In Australia, even after the global financial crisis, it's still common to only have 5-10% and some people even use other assets as collateral to borrow all 100%. I hear historically this has not been ...
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1answer
191 views

What makes one smart and/or successful in investing? [closed]

Pretty broad question, but I hear these things thrown around a lot and was wondering if such a canonical or straightforward definition exists. To make this simple: What makes an investor "smart" as ...
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2answers
409 views

What are some signs that the stock market might crash? [closed]

I have about one year of experience as an investor and my goal is to aggressively grow my portfolio over the next 40 years for retirement. I have had good success achieving my goal over the last year ...
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2answers
144 views

How to mitigate the risk of Euro Stoxx 50 ETF?

I started building my retirement portfolio with an Euro Stoxx 50 ETF. To minimize the risk a bit I would like to buy another ETF (and have both 50-50 in my portfolio). Is buying a blue chip stocks ETF ...
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1answer
219 views

Is the risk premium with insurance higher or lower than investments?

Insurance of any kind is always going to have a lower expected value than self-insuring. If there's a 10% chance of a loss of ₹100 occurring, insurance companies will charge more than ₹10, to cover ...
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1answer
2k views

Is there extra risk in owning an ADR vs. the underlying stock?

One of my favorite on-again-off-again recovery plays is Mittal Steel (NYSE: MT). I buy the MT ADR there (American Depositary Receipt) because I live in the US. Am I exposing myself to any extra risk ...
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4answers
174 views

Can the risk of investing in an asset be different for different investors?

If 2 people invest the same amount in the same asset at the same time, will their risk be different if they use different risk management strategies? Say Inventors A and B both buy 1000 shares in ...
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1answer
259 views

High risk investment [closed]

I have a spare £500 I do not mind losing too much. But, I do not just want to throw it away. I have found high risk investments like this one from JP Morgan Chase, and over the past few years all ...
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3answers
251 views

Understanding Interest Rate Risk: What is it, and what techniques do I use to minimize it?

I'm looking to develop a fixed-income account of bonds and dividend-paying equities. I've heard that bonds are susceptible to interest rate risk, but I don't really understand what that means. What ...
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1answer
99 views

Are bond ETFs considered low risk in this market?

I'm thinking about moving my money to an automated management service. I've set my risk profile to 3.5 (low) which means they would invest around 35% in bond ETFs. With today's interest rates being ...
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1answer
286 views

Brainstorming: Homebrew “credit” card?

In response to another question (about how to make credit cards pay interest on any positive balance), I came up with an odd combination: Get an account with both a debit card and a linked overdraft-...
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34 views

Do the rewards of custom contract size in OTC derivatives justify the counterparty risk?

If I decide to trade OTC derivatives, I take on counterparty risk. Since the transaction is not overseen by a clearing house/firm, I accept the risk that the counterparty may not honour the obligation....
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1answer
104 views

What's the role of commodities in a IRA portfolio?

People keep talking about percentage of stocks vs bonds to manage risk when building a personal investment portfolio. What's the role that commodities have in managing risk when building an IRA ...
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1answer
197 views

Does anyone know where I can find a free efficient frontier tool, or an informative and legitamate/academic graph of the efficient frontier?

I'd like to build a portfolio based upon modern portfolio theory and I'd like to find a tool I can use to calculate the proper mix of asset classes. Can anyone help with this? I think a good chart/...
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3answers
273 views

Is this trick enough to totally prevent bankrupcy in a case of a crash?

I have a trading scheme that is very profitable but is also really dangerous because it opens a lot of trades at the same time with high leverage and else. So the trick is to open only short (sell) ...
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3answers
6k views

How is the Efficient Frontier drawn?

I know efficient frontier is the collection of expected return on a portfolio and the level of risk(e.g. standard deviation). What I don't understand is that is the efficient frontier really drawn ...
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1answer
2k views

When to liquidate mutual funds for a home downpayment

I have about $18k in mutual fund assets that I am planning to use for a down payment on a home within the next 1-2 years. Combined cost basis for the assets in question is +$2,800. Right now the asset ...
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91 views

Forward Contract Extension

I was reading this article Below is a small snippet from the article. I'm wondering how Barrick gold could extend the hedge at its own option. How would this be executed and how do they have this ...
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214 views

Does long term asset growth really converge to that derived from compound interest formula?

Many websites/experts claim that the longer you hold your assets, the likelier your asset's return is closer to that predicted by the compound interest formula. However, some other experts claim ...
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3answers
510 views

What is the theory behind Rick Van Ness's risk calculation in the video about diversification?

In the video, Rick Van Ness states the following scenario: Stock A has a 7% return with +/- 1% risk Stock B has a 3.5% return with +/- 0.5% risk Stock A and B are perfectly negatively correlated. A ...
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2answers
220 views

Is there an advantage to international stock diversfication?

I'd like to reduce my risk of investing solely in the U.S. stock market compared to the rest of the world. However, my concern is that perhaps the U.S. stock market already has such international ...
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1answer
397 views

Is socialtrend.com or/and feelthetrend.com legitimate?

I'm not particularly literate about finance and market. One of my friend invited me in a 1-hour meeting about this Social Trend marketing of TheTrendSocial.com. Apparently buying one of their "kit" ...
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172 views

How to LAY/SHORT SELL multiple mutually exclusive outcomes in sequential events?

(n.b. Still not sure if this is the right place, but it was suggested by @SRKX) How would I calculate the percentage of my wealth to invest when LAYING/SHORT SELLING multiple mutually exclusive ...
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3answers
565 views

What proactive measures can be taken before or when a lender closes your credit card?

A blogger and contributor here recommended Digital Federal Credit Union (DCU) as a possible lender in my search for cash secured credit cards to establish my credit history, and I got approved for one ...
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5answers
2k views

What should I do with the stock from my Employee Stock Purchase Plan?

I've got an employee stock purchase plan program. The details are a little tricksy, but I basically get to buy about 2500 shares of company stock at something like $2.33/share... and the stock has ...