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Running Head: RISK MANAGEMENT
Financial Risk Management
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RISK MANAGEMENT 2
Stock Prices and Risk Measurements Outline
I. Introduction
Risk management aims to recognize and oversee organizational risks as objectives are
met. Risks are crucial as they bring a threat to the organization's sustainability, which
may lead to bankruptcy or significant losses. The need for risk management is as a result
of the losses organizations experienced
A. Present issue: Risk management is essential in any type of investment. Any
investment's main aim is to make profits on initial capital on any entity; individuals,
firms, or government. There is a Loss of Confidence by investors and traders to invest
due to the stock market's global turbulence.
B. Population/ The Target field: Investors and traders
C. Core Terminologies: Investment, trade, stock price, volatility
Thesis Statement: Due to capital loss in investments, Traders dread to invest their
capital in stocks due to global turbulence. Compared to the market index, how profitable
is it to invest in stocks (Camm, 2012).
II. Background
A. Historical Stock Investment Overview: Shareholders and Stockholder in the past
made huge profits due to the stability of the market (Grinblatt, and Moskowitz, 2004).
B. Historical Stock Investment Loss Overview: When the stock market crashed in
1929 and 2008, there was a significant loss of investor's capital (Altman, 2009).
RISK MANAGEMENT 3
C. Link between Loss of Investment and Fear of Investment: Investors who lost their
money on stock investments fear reinvesting, especially those involved in the significant
market crashes.
D. Gaps in the Research: Limited information exists on financial risks that come with
stock investments and the volatility market.
III. Prices and Risks
A. Interest rate shifts in domestic and overseas geographical areas: Interest rate
changes can significantly impact loans taken by organizations. The sudden change in
foreign currency can impact the organization with gain or loss of a trade cycle, thus
timing differences to gain profits (Mendoza, 1995). An example is an American
liquor company that has signed an agreement to procure 100 cases at EUR 5,000 from
a French retailer. The value of the U.S. Dollar loses its value against the Euro to EUR
1 = $1.10 at the time of sale. The sum negotiated is already €5,000, but now the U.S.
dollar value is $5,500, which may be the cost that the organization will have to spend.
B. Variance in actual Budget: Investing in overseas stocks has adverse effects on the
profitability margin of the budget-to-actual indifference (Mendoza, 1995). For
example, an organization may have budgeted the revenue of this month at $10,000,
by comparing budget data to real results; the total profits amounted to $8,000,
meaning they have a budget-to-actual-variance $2000.
C. Translation of foreign currency concerning the financial outcome restructuring:
This only applies to entities with branches outside the country. For example, if your
RISK MANAGEMENT 4
business is based in the U.S. but has projects in the U.K., you will need to exchange
the British pound into a U.S. dollar (Chambers and Bailey, 1996).
D. The fluctuation of Product Prices: If the price of commodity changes, it may affect
the price of a purchased stock or commodity (Takayasu and Takayasu, 2008). The
reference to the cost of the purchased item or stock may vary, creating loss or profit.
For example, overproduction of commodity or overbuying of stocks will cause the
price to go low.
VII. Conclusion
A. Restatement of Thesis: Due to capital loss in investments, Traders dread to invest their
capital in stocks due to global turbulence. Compared to the market index, how profitable is it to
invest in stocks (Camm, 2012).
B. Conclusion: Risk management determines how much a profit an organization can make
without going on a loss. The aim was to analyze the volume of gains relative to the market index
and predictability of expected outcomes of stocks. The volatility of stocks in terms of uncertainty
relative to the market index, and essence, the calculation of applied risk management metric
called the capital asset pricing model.
References
RISK MANAGEMENT 5
Authors/Task Force Members, Camm, A. J., Lip, G. Y., De Caterina, R., Savelieva, I., Atar,
D., ... & Bax, J. J. (2012). 2012 focused update of the ESC Guidelines for the
management of atrial fibrillation: an update of the 2010 ESC Guidelines for the
management of atrial fibrillation Developed with the special contribution of the European
Heart Rhythm Association. European heart journal, 33(21), 2719-2747.
Grinblatt, M., & Moskowitz, T. J. (2004). Predicting stock price movements from past returns:
The role of consistency and tax-loss selling. Journal of Financial Economics, 71(3), 541-
579.
Altman, R. C. (2009). The great crash, 2008. Foreign Aff., 88, 1.
Mendoza, E. G. (1995). The terms of trade, the real exchange rate, and economic
fluctuations. International Economic Review, 101-137.
Chambers, M. J., & Bailey, R. E. (1996). A theory of commodity price fluctuations. Journal of
Political Economy, 104(5), 924-957.
Takayasu, H., & Takayasu, M. (2008). U.S. Patent No. 7,315,835. Washington, DC: U.S. Patent
and Trademark Office.

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Running Head: RISK MANAGEMENT

Financial Risk Management

Stock Prices and Risk Measurements Outline

of the losses organizations experienced

A. Present issue: Risk management is essential in any type of investment. Any

firms, or government. There is a Loss of Confidence by investors and traders to invest

due to the stock market's global turbulence.

B. Population/ The Target field: Investors and traders

C. Core Terminologies: Investment, trade, stock price, volatility

Thesis Statement: Due to capital loss in investments, Traders dread to invest their

is it to invest in stocks (Camm, 2012).

A. Historical Stock Investment Overview: Shareholders and Stockholder in the past

B. Historical Stock Investment Loss Overview: When the stock market crashed in

stock investments and the volatility market.

III. Prices and Risks

A. Interest rate shifts in domestic and overseas geographical areas: Interest rate

timing differences to gain profits (Mendoza, 1995). An example is an American

profitability margin of the budget-to-actual indifference (Mendoza, 1995). For

meaning they have a budget-to-actual-variance $2000.

C. Translation of foreign currency concerning the financial outcome restructuring:

For example, overproduction of commodity or overbuying of stocks will cause the

A. Restatement of Thesis: Due to capital loss in investments, Traders dread to invest their

invest in stocks (Camm, 2012).

B. Conclusion: Risk management determines how much a profit an organization can make

called the capital asset pricing model.

Heart Rhythm Association. European heart journal, 33(21), 2719-2747.

The role of consistency and tax-loss selling. Journal of Financial Economics, 71(3), 541-

Altman, R. C. (2009). The great crash, 2008. Foreign Aff., 88, 1.

fluctuations. International Economic Review, 101-137.

Chambers, M. J., & Bailey, R. E. (1996). A theory of commodity price fluctuations. Journal of

Political Economy, 104(5), 924-957.

and Trademark Office.

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