4 major types of risk

[cookies]

Is there a section that provides additional examples of 4 major types of risk?

Thank you

 

[David Harper CFA FRM]

cookies,

not really, there is a practice question in the Jorion PQ PDF, but it's just a summary of Jorion's brief 1.1.2, so we don't go deeper than:

• Human (Accident) including regulatory policy (and unintended consequence
• Human (Deliberate) including terrorism and war
• Natural disaster including earthquakes and hurricanes
• Economic growth including the creative “disruption” caused by technological innovation

Thanks,

 

[David Harper CFA FRM]

Oh sorry, i was thinking sources since you mentioned four. But i realize you probably mean Jorion's four types in chapter 1: market, liquidity, credit and operational.

Well, Jorion's four risk types are a preview of the rest of the FRM, so in a sense, it's all of the detail to follow!

The FRM, it is easy to forget (as i mention in the recent focus review P1.1 video), is generally concerned with non-business financial risks
... so FRM is not concerned with business risks (eg., strategy, technology)
... and FRM is not too greatly concerned with non-business, non-financial risks (eg., reputation, political)

But the FRM is all about the "big three" non-business financial risks: market (liquidity is typically slotted under market risk), credit and operational
... for example, pretty much all of the T4. John Hull derivatives constitutes "examples" of market (price) risk.

I hope that helps,