What are the characteristics of financial risk, what are the characteristics of financial risk

The uncertainty of financial risks, the objectivity and universality of financial risks, the potential, superposition and accumulation of financial risks, and the expansion and contagion of financial risks.

1.Uncertainty of financial risk. Uncertainty is an essential characteristic of financial risk, but it does not mean that financial risk is unmeasurable.

After mastering certain information, you can use probability theory and statistical strategies to further measure and manage financial risks.

2.Objectivity and universality of financial risks. Objective existence refers to the fact that the occurrence of financial risk is a phenomenon that objectively exists without being transferred by human subjective will.

Universality refers to the ubiquity of financial risks and the presence of financial risks at all times, and financial dangers may be lurking in every industry, financial instruments, operating institutions and every trading behavior.

3.The potential, overlapping and cumulative nature of financial risks. There is a great information asymmetry between finance and capital demanders, and the information obtained by financial subjects on the changes in financial assets is incomplete, so financial risks have great potential, and risk factors at the same point in time will be intertwined, interact and influence each other, and continue to superimpose and accumulate in various financial institutions.

4.The expansive and contagious nature of financial risks. In the financial market of a certain region, various financial assets and various financial institutions are intertwined and closely related to each other to form a complex system, and fluctuations will be transmitted between different financial assets, and different financial institutions will also show the characteristics of common prosperity and common loss.

In addition, international financial ties are becoming increasingly close, and financial risks will be transmitted from one country to another through various means, showing the characteristics of transnational contagion.

Financial risk refers to the risks related to finance, including market risks, credit risks, liquidity risks, operational risks, industry risks, laws, regulations or policy risks, personnel risks and other finance-related risks arising from financial activities.

The basic characteristics of financial risk are as follows:

1) Uncertainty: It is difficult to fully grasp the factors affecting financial risks in advance.

3) High leverage: financial enterprises have high debt ratios and large financial leverage, resulting in large negative externalities, and financial instrument innovation and derivative financial instruments are also accompanied by high financial risks.

4) Contagion: Financial institutions assume the function of intermediaries, severing the correspondence of original lending. Risks on any side of this intermediary network may have an impact on other parties, and even the occurrence of financial risks in industries and regions, leading to financial crises.

Financial risk is the possibility that a certain amount of financial assets will suffer a loss in expected income in a future period. For financial operation, risk is an objective existence, and what we need to do is to learn how to control risks and regulate financial risks.

Financial risks can be divided into market risks, institutional risks, institutional risks, etc., but the biggest risks in China come from the impact of the traditional system and violations caused by regulatory failures. Due to the institutional and institutional factors accumulated over a long period of time, including the influence of the traditional planned economic system, the construction funds of state-owned enterprises are excessively dependent on bank loans, and the bank credit funds are financialized; In addition, the internal management of financial institutions has resulted in a large number of non-performing loans, resulting in low quality of financial assets.

China's first-class, first-class market non-standard operation has disrupted the normal order, there has been a large number of violations of laws and regulations, some first-class institutions and enterprises (including listed companies) and a small number of banking institutions collude to make huge profits, the first speculative risk into the banking system; Some enterprises and financial institutions evade state supervision and conduct overseas transactions in violation of regulations, causing huge losses to the country; Listed companies are not standardized, and even become a means of poverty alleviation.

The basic characteristics of financial risk include ().

a.Uncertain.

b.Measurability.

c.Contagiousness.

d.Controllability.

e.Compatibility.

Correct answers: a, b, c, d

Financial risks can be broadly divided into 8 types, <>

According to the classification of causes, it can be divided into: credit risk, market risk (including exchange rate risk, interest rate risk and investment risk), liquidity risk, operational risk, legal risk and compliance risk, country risk, and reputation risk;

According to the perception of risk by market players, it can be divided into: subjective risk and objective risk; According to whether financial risks can be diversified, they can be divided into: systemic risk and non-systematic risk.

Let's take a closer look.

1. Credit risk.

Credit risk in the narrow sense: the risk of economic loss due to the counterparty's inability to perform the contract, i.e., the risk of default.

Credit risk in a broad sense: due to the impact of various uncertain factors on the credit of financial institutions, the actual income results of financial institutions deviate from the expected goals, resulting in losses or additional income in business activities.

2. Market risk.

Narrow market risk: The loss that a financial institution's trading position in the financial market may suffer due to adverse changes in market** factors.

Broad market risk: The possible gain or loss of a financial institution's trading position in the financial market due to changes in market factors. Broad market risk fully considers that the market may change in its favor and unfavorable direction, which may bring potential gains or losses.

3. Liquidity risk.

In 2015, the China Banking Regulatory Commission (CBRC) issued the Measures for the Management of Liquidity Risk of Commercial Banks (for Trial Implementation), which defines liquidity risk as the risk that a commercial bank is unable to obtain sufficient funds in a timely manner at a reasonable cost to repay due debts, fulfill other payment obligations and meet other capital needs for normal business operations.

Fourth, operational risks.

Operational risk in the narrow sense: the possibility that the operation department of a financial institution may suffer economic losses due to the lack or negligence of internal control, system errors, etc. in the course of operation.

Operational risk in the broad sense: all risks other than credit risk and market risk of financial institutions.

5. Legal risks and compliance risks.

Legal risk: A special operational risk, which refers to the possibility that a financial institution may suffer economic losses as a result of the possibility that the contract or other documents signed between the financial institution and its employees or customers violate the relevant laws or regulations, or the relevant terms are not legally enforceable, or that it fails to properly perform its legal or regulatory duties to the customer.

Compliance risk: The risk that the bank may be subject to legal sanctions or regulatory penalties, significant financial losses or reputational damage due to its failure to comply with laws, regulatory provisions, rules, relevant guidelines formulated by self-regulatory organizations, and codes of conduct applicable to the bank's own business activities.

6. Country risk.

Country risk refers to the risk that an economic entity will suffer losses due to changes in the economic, political and social aspects of other countries when it conducts international economic, trade and financial exchanges with non-domestic counterparties.

7. Reputational risk.

Reputational risk refers to the possibility that financial institutions may suffer corresponding economic losses due to the loss of customers, shareholders, business opportunities, and business costs due to negative evaluation by the public.

The basic characteristics of financial risks are financial risks such as large increments of negative assets, reduced liquidity, inability to turn over, failure to accept mature products, and deterioration of banking and corporate operating conditions.