Describe how Value-at-Risk (VAR) is used as a tool to assist management with achieving its overall strategic financial goals?
Given the fallout that we've all witnessed coming from the recent global financial crisis, what is the trend over the last decade on a Value at Risk (VAR) methodology being utilized together with other strategic management approaches by more managers across more companies and industry sectors?
Do you believe that the circumstance described above, based on the results of your research, is a good outcome? Explain.
Does your company use Value at Risk (VAR) or some other method in conjunction with its strategic management practices? Do you believe that their decision makes sense? Explain.
Please respond as concisely as possible to each question. Credit will be given for the integration of academic theory together with the use of empirical evidence and/or the use of well researched, relevant practical examples.
When it comes to managing risk in the company cash flows, some firms hedge their investments.
Can someone tell us all very plainly and clearly -- what is a hedge? How is a very simple financial hedge usually constructed? Please explain.
Alright then - derivatives are investment vehicles that are also used for hedging. They are usually designed to reduce financial risks and increase financial returns for the buyer and the seller. Can someone please explain, what does it mean to 'reduce risk and increase returns'?
If we try to understand the varying perspectives of different stakeholders in a business --- for example: Investor stakeholders; Management and the Board of Directors stakeholders; Employee stakeholders; Citizen stakeholders (i.e. society at large) --- does the act of hedging with a derivative instrument make sense for the financial activities of any company, if the goal is to create and maintain value for Investors and Shareholders? Does it make sense for other stakeholders? Explain.
Please respond as concisely as possible to each question. Credit will be given for the integration of academic theory together with the use of empirical evidence and/or the use of well researched, relevant practical examples.