Risk management and Financial engineering

Risk Management and Financial Engineering
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Risk management and Financial engineering
The discussion focuses on risk mitigation and financial engineering in the current and corporate world. Initially, risk management involved identifying an industry, correct risk exposure using more effective means such as insurance products (Chance, 2019). Due to the changing modern environment, risk management entails identifying, measuring, and managing every type of risk exposure. Risk exposures include interest rate, commodity, and currency risk exposure. Some ways reduce this is by spreading, insuring, and diversifying, insuring, and hedging. Hedging minimizes the likelihood of monetary strain and the expected costs of financial trouble. On the other hand, financial engineering applies the principles of business economics to develop as well as price financial instruments. It merely means putting together the risk exposure major points.
Financial innovation can create problems by being the source of systematic risk during a monetary crisis. This occurs when a fi...