文档介绍：财务管理外文文献
Volume 29 Number 5/6 2003
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Future Trends and Challenges of Financial Risk
Management in the Digital Erewards can
come with it are the foundations of the free market economy. But financial risks are a dif-
ferent matter, as often businesses are not accustomed to accepting and managing them.
The paralysing uncertainty of volatile interest rates can cripple the ability of a firm to ac-
quire financing at reasonable cost. Firms that operate in foreign markets can have excel-
lent sales performance offset if its own currency is strong. Managers of portfolios deal on
a day to day basis with widely unpredictable and sometimes seemingly irrational finan-
cial markets. These examples clearly demonstrate that financial risks can be important for
many businesses.
In coping with growing financial risks, various derivative products ., options,
swaps have been developed in the past 20 years and they are now widely used by large
corporations1
2
, financial institutions, professional
investors, and individuals . Certain
types of derivatives are traded actively in public markets, similar to the stock exchanges.
The vast majority of derivatives, however, are created in private transactions.
The critical importance of using derivatives properly has created a whole new ac-
tivity called financial risk management. Financial risk management is the practice of de-
fining the risk level of a firm desires, identifying the risk level a firm currently has, and
Managerial Finance
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using derivatives or other financial instruments to adjust the actual level of risk to the de-
sired level of risk see . Chance, 2000 . Financial risk management has also spawned
an entirely new industry of financial institutions that offer to take positions in derivatives
opposite the end users, which are corporate or investment funds.
The need for sound financial risk management was highlighted by a number of
high-profile risk managem