Risk Management

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Date Submitted: 09/20/2011 08:34 PM

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Risk Management

FIN 610

Dr. Khawaja

Jeremy Dobes

Executive Summary

The intent of the following composition is to explain the benefits of risk management as it pertains to investments. The largest benefit of investment risk management is the ability to reduce risk while still achieving the expected return. This paper presents the types of risk analytic tools used to achieve an optimum level of return based amount the risk assumed.

The purpose of the essay is to explain types of risks such as: unsystematic risk, correlation, beta, and standard deviation. It will also present the types of risk that can not be reduced such as systematic risk.

This paper will define what risk is by the ways and means one can take to reduce risk. As one might expect during the last few years, many new ideas and studies have been performed due to the volatility of the financial markets. Reducing risk through equity collars, tactical allocations, alternative investing, hedging, and economic value added momentum will be presented. A model of reducing risk though multiple asset classes and how this type of portfolio can not only reduce overall risk but also provide an adequate level of return during the recent economic down cycle.

The essay will highlight some of these new techniques such as the evaluations of Economic Value Added Momentum, or more commonly refer to as EVA momentum, which was developed in the 1990s and is now slowly making it way into the risk management community.


In order to understand the details of risk management as it pertains to investments and portfolios, the essay will introduce the tools used as well as the calculations performed to measure and manage risk. It will explore new topics and ideas as well as real-life examples.

Risk Management helps investors, financial planners, mutual fund managers, hedge fund mangers, traders, and financial analysts make decisions that are in the best interest for their particular situation....