Currency risk management

Abstract

We have seen in Chapter 10 methodologies whereby to represent uncertainty and manipulate uncertainty-affected propositions. One particular class of uncertainty is the likelihood of the loss (or gain) of an asset or of return on it, which in a generic way can be one definition of “risk”. In general terms, insurance of property and financial assets is the most common way whereby this risk can be limited, and possible losses recouped. However, in most cases, such insurance will have a cost whereby the risk can be protected over a time span; the notion of “premium” corresponds to the payment of the cost of this insurance over a specified time interval.