Enron scandalThe Enron scandal was an accounting scandal involving Enron Corporation, an American energy company based in Houston, Texas. Upon being publicized in October 2001, the company declared bankruptcy and its accounting firm, Arthur Andersen then one of the five largest audit and accountancy partnerships in the world was effectively dissolved. In addition to being the largest bankruptcy reorganization in U.S. history at that time, Enron was cited as the biggest audit failure.
Valuation riskValuation risk is the risk that an entity suffers a loss when trading an asset or a liability due to a difference between the accounting value and the price effectively obtained in the trade. In other words, valuation risk is the uncertainty about the difference between the value reported in the balance sheet for an asset or a liability and the price that the entity could obtain if it effectively sold the asset or transferred the liability (the so-called "exit price").
Fuel price risk managementFuel price risk management, a specialization of both financial risk management and oil price analysis and similar to conventional risk management practice, is a continual cyclic process that includes risk assessment, risk decision making and the implementation of risk controls. It focuses primarily on when and how an organization can best hedge against exposure to fuel price volatility. It is generally referred to as "bunker hedging" in marine and shipping contexts and "fuel hedging" in aviation and trucking contexts.
Operational riskOperational risk is the risk of losses caused by flawed or failed processes, policies, systems or events that disrupt business operations. Employee errors, criminal activity such as fraud, and physical events are among the factors that can trigger operational risk. The process to manage operational risk is known as operational risk management.
Managerial risk accountingManagerial Risk Accounting is concerned with the generation, dissemination and use of risk related accounting information to managers within organisations to enable them to judge and shape the risk situation of the organisation according to the objectives of the organisation. As a part of the management accounting system and function, managerial risk accounting has the following two main purposes: decision-facilitating or decisions-making decision-influencing or stewardship These purposes are achieved by providing respectively relevant information to improve the ability and willingness of the employees to achieve the organisations’s goals and objectives.
Risk parityRisk parity (or risk premia parity) is an approach to investment management which focuses on allocation of risk, usually defined as volatility, rather than allocation of capital. The risk parity approach asserts that when asset allocations are adjusted (leveraged or deleveraged) to the same risk level, the risk parity portfolio can achieve a higher Sharpe ratio and can be more resistant to market downturns than the traditional portfolio.
Credit derivativeIn finance, a credit derivative refers to any one of "various instruments and techniques designed to separate and then transfer the credit risk" or the risk of an event of default of a corporate or sovereign borrower, transferring it to an entity other than the lender or debtholder. An unfunded credit derivative is one where credit protection is bought and sold between bilateral counterparties without the protection seller having to put up money upfront or at any given time during the life of the deal unless an event of default occurs.
Risk–return spectrumThe risk–return spectrum (also called the risk–return tradeoff or risk–reward) is the relationship between the amount of return gained on an investment and the amount of risk undertaken in that investment. The more return sought, the more risk that must be undertaken. There are various classes of possible investments, each with their own positions on the overall risk-return spectrum. The general progression is: short-term debt; long-term debt; property; high-yield debt; equity.
Aswath DamodaranAswath Damodaran (born 24 September 1957), is a Professor of Finance at the Stern School of Business at New York University (Kerschner Family Chair in Finance Education), where he teaches corporate finance and equity valuation. Known as the "Dean of Valuation" due to his expertise in that subject, Damodaran is best known as the author of several widely used academic and practitioner texts on Valuation, Corporate Finance and Investment Management as well as provider of comprehensive data for valuation purposes.
Downside riskDownside risk is the financial risk associated with losses. That is, it is the risk of the actual return being below the expected return, or the uncertainty about the magnitude of that difference. Risk measures typically quantify the downside risk, whereas the standard deviation (an example of a deviation risk measure) measures both the upside and downside risk. Specifically, downside risk can be measured either with downside beta or by measuring lower semi-deviation.
