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RISK AND RISK MANAGEMENT

Home | PORTFOLIO MANAGEMENT

Illustration: Graduation Day

Welcome to my website!

My name is Jane Ndegwa, an MBA student at Franklin University. I am a loan officer at JP Morgan Chase and originally had a focus in Leadership, but after a short hiatus, changed it to finance for the sheer challenge.
 
Understanding risk and risk management enables an investor to comprehend the risk-return tradeoff; that relatively risky investments earn a relatively high rate of return.
 
As an MBA student, this course has not only provided me with a light bulb moment, in understanding the relationship between the Fed., risk-free rates, beta and market returns, but also elaborated my risk aversion.

Eye Glasses, Spinning

Risk is the chance that the actual return from an investment may differ from what is expected. Examples of risks include but are not limited to:

  • Purchasing Power Risk - the chance that inflation or deflation will affect investment returns
  • Tax Risk - chance that Congress will make unfavorablechanges in tax laws
  • Market Risk - chance that political and socio-economonic factors will result in a declination of returns 

CHEAT SHEET:
  1. Beta - this is a measure of nondiversifiable risk, also know as market risk. It is critical in determining how the price of a security responds to various political and socio-economic factors e.g. war, inflation
  2. Risk-free rate - the rate of return earned on risk-free investments such as US Treasury Bills
  3. Market Return - the actual average return on stock investments
  4. Capital Asset Pricing Model (CAPM) - A model that uses Beta, the risk-free rate and the market return, to help investors identify the required rate of return on an investment

* When the beta {risk} increases, so do the risk premium and the required returns. The reverse is also true. *

 

Tumbling
Risk Management

Jane W. Ndegwa
Phone: (614)323-5969

info@service.com

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