—— Ell
Jems,
‘on Manufacturing System
ia2iin)
‘THE RI
§ MANAGEMENT OF THE CAPITAL MARKET
Costel CEOCEA
Abarat: The participans al the invexment processes all agree tht risk cant be completely elaningied ond
woiritaia beled sich a manner thot the nogtve el are es and les. nom erronment the rik wey
ae ns the whole conbinton of srg, proces: insure ond adequate model whch
Telp the sition Yo contro the risk in a great manner
Key words risk management capital marker
1, CAPITAL MARKET'S RISK ~ AN
AGGREGATED RISK
‘Any market is characterized as an assembly of sys
ematc relations, organized around the property. Because
these relations have a permaneat character, they are more
‘or less sperialized and they are created between buyers
nd sellers, jnterrelated in terms of transaction price
‘The market's sk describes itself as an aggregated
risk, 1aving both systematic and unsystematic risks. The
‘next diagram shows the classification of the capital mar-
1.1. Price rik
“Te contra clement inside she unsystematic sks
category isthe price risk The ek of price Toss resis 1m
the ic tha price variations brings tosses tothe transfer~
tie securities ansactions participants: when the price
foes up, there afe Losses forthe long position’s investors,
shen the price go low, there are losses For the short posi-
Son's investors
"The price's main advantage is that it can easily be
recognized because he appears directly on the market On
the market, the price has the following forms: open.
Close, maximlr, minkmuen, average, target price, spot
market price ofthe basi commodity or futures price, or
derivatives exercise price.
‘Verifying the actual operation conditions of an eff
cient market theory, based on a continuous Brown
movement, the prices are following a directional, deter
Inited evolution, forecasted to be carying though time
{Gait rate) and & temporary Actuation rate (variance,
‘which suffered consolidations and regains following the
‘ata nw of distribution.
Price's negative effects can be counteracted ina rele
‘van measure by using she derivatives sratesies
“The fuctuation risk of the basis price
'As part of the price risk thee isthe basis risk, whieh
ism specific risk forthe derivatives and it expresses the
difference between the security's spot price and fuures
rice, Tough the two prices move inthe sume direction,
the difference between them is the time period to mtr
ity forthe derivative contacts and the delivery, sorage
and payment conditions on the spot market
Athi ese, the imporance of volatility knowledge
increases; this indicator shows how moch the pive of an
element can fluctuate wards a basis in a tine period,
finder normal circumstances. The volatility risk Fests n
the fact that, at some point, the securities peice uct
tion can exeeed the investors" expectations becuse of
the changes that take place on the elements that deter
tn the size of the fndividual price ar he basis vice
Referring to lhe derivatives contacts (wes an! wp
tions) the open price for position 4s chosen by the i
eslrs sosording to his forecast and nerest and it 6SSEa7—_—_
toi ce
: while
ioe
eof
eh of investor 1S ‘entitled 19 ani
ee ‘the spot price and the bass
Pe oe indicator"s SZ
The som ary of
ce
rn
er
reais (srapening) We
2. APPLICABLE PROCEDURES IN MARKET
AIsK MANAGEMENT
vet ik management sels down HRS
wt i ean he es he eins
roa recast ora # pti
te of mare’ iu.
The cal mathe i
deere seco dens o te grits sea?
ee Sy perm preservation funtion fr the Po
Neer oor ang tls, anon he mses
see ema anaes ei postion represen tbe
taper aspects te erasaton’s rie andthe
it order ad the sop 0F-
olo’s statexies
Zea eto ee
‘port ievel represents the inoment when the offer if 260,
ein emesis
NS ee are accel
a
"Acne oe ins
‘point when the demand becomes zero, the commodities
ful en's i holly 0
Sioa cachernot cles
Gall ce re
‘Market's participants have three goals according 10
Ses :
x or hedging, when 0 minimize
pee ee
"Signo
—wbitrage, when, from 8 neutral position towards the
eee eee
neat
sion when ty cat 84 SPEED 2 pox
a main advantages {om the price
det 10 08 . i
movement: sysideration the feet thal the access po
Taking ito OR financial information is optimized
steal and #°
ron ee recline nda
ivi, Scan ee
2 chal a Fey nso Win ae
for ani rt posi synchronization witty
wn ft a deere eso
cc enn ee
(ep
= te ey aves aac
on ty 2 combing
sti can ew
oe coins vty fe
oe oie 901 denn ei
en fore: transactions, depending on your
Hs eno cries bone
te eet toed hoes
‘opening posito
the lasses case
suchas: :
othe opening performance tisk in 8 sesuty’s long
poston soured op wrt he posi cat de price
Pestaes and as a esse-to-case resolution, the investor
fan counteract the effect through # selling stop order or
9 opening along put position with options or rading
‘hnultaneously a put contract (adjoint put)
“when opering a short sale, the trader's risk isthe
price? mperessing and he can restrict the loss by 2 stop
ter or fong call option;
~ im along forward positon, the contracts perform
ance risk s ianaged by a short futures coniriet oF 8 long
sal option,
~in a short forward position, the contract's perform:
ance risk is managed by a long futures contractor & shor
call option;
the furures contracts can be covered only incase of