Financial risks regers to the possibility og losing money on an investment or business venture. There are several types of financial risk including Credot Risk, liquidity risk and equity risk.
Credit Risk can be defined as the risk that a company cannot repay it's borrowers. We can separate credit risk into an additional 6 streams:
Default Risk: the borrower goes into default
Severity Risk: the loss rate in the
When looking at balance sheets, income statements and financial reports the level of information can be rather difficult to dissect. Thus, companies will use financial ratios to better get the picture of the companies overall performance.
Used financial ratios can be split into 4 groups.:
Profiatability and performance
Management's ability to control expenses and to earn a return on the resources
Regression analysis is considered one of the most important techniques in statistics and machine learning.
The concept is relatively simple, by using variables we are able to see relationships between different types of data.
An example could be understanding the difference between seasons and crop growth. There is most likely to be a correlation between the amount of light from the summer which allows crops to grow. We can understand this
Our aim is to provide, in a mathematically rigorous but intuitive way the basic notions needed to deal uncertainty in finance.
Consider the experiment consisting in rolling a fair 6 sided die.
E ={Rolling an even number}
The Probability of E, \(\mathbb{P}(E) = \frac{1}{2}\)
The number of outcomes in E = {rollling an even number} =
A derivative is an instrument whose value depends on some underlying financial asset, commodity or predefined variable.
Financial assets: interest rates, bonds, stock indices, foreign exchange
Commodities: energy products, agricultural products, metals
OTC (Over-the-counter) derivatives are traded between two counterparts and tailored to their needs. Exchange-traded derivatives are traded on an organized exchange