Questions, Questions: How Firms Should Evaluate Financial Risk

January/February 2011, AFP Exchange
By Amol Dhargalkar

The last two years have seen unparalleled volatility in all aspects of financials markets. The price of oil has ranged from $32 to $145 per barrel, the EUR-USD exchange rate has traded between 1.19 and 1.63, and the 10 year US Treasury yields have gone from 2 percent in late 2008 to 4 percent in early 2010 to back below 3 percent recently. These extreme swings and the prevalence of “underwater” hedges have often left boards and senior management questioning their risk management strategies.

In response to these concerns, this article by Chatham’s Amol Dhargalkar will create a framework of questions for firms with multiple financial risks (interest rate, currency and commodity risk) to help define the objectives of a hedging program. Chatham Financial has deep expertise in the areas of interest rate, currency and commodity risk.

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