Risk Management - Answer Sheet

1. To protect against price swings in the market, companies use hedging strategies.

2. Credit risk refers to the possibility that a borrower will not repay their debt.

3. By investing in a wide range of assets, companies can reduce risk through diversification.

4. The risk that arises from fluctuations in stock prices, interest rates, or exchange rates is called market risk.

5. Liquidity measures how quickly an asset can be converted into cash.

6. Financial products such as options and futures, used to manage risk, are known as derivatives.

7. Companies must ensure that they follow all laws and regulations to maintain compliance.

8. During periods of high market volatility, prices can change drastically in a short time.