Introduction

Stanley Myint and Fabrice Famery

Contents

Foreword

Introduction

1.

Theory and Practice of Corporate Risk Management

2.

Theory and Practice of Optimal Capital Structure

3.

Introduction to Funding and Capital Structure

4.

How to Obtain a Credit Rating

5.

Refinancing Risk and Optimal Debt Maturity

6.

Optimal Cash Position

7.

Optimal Leverage

8.

Introduction to Interest Rate and Inflation Risks

9.

How to Develop an Interest Rate Risk Management Policy

10.

How to Improve Your Fixed-Floating Mix and Duration

11.

Interest Rates: The Most Efficient Hedging Product

12.

Do You Need Inflation-linked Debt?

13.

Prehedging Interest Rate Risk

14.

Pension Fund Asset and Liability Management

15.

Introduction to Currency Risk

16.

How to Develop Currency Risk Management Policy

17.

Translation or Transaction: Netting Currency Risks

18.

Early Warning Signals

19.

How to Hedge High Carry Currencies

20.

Currency Risk on Covenants

21.

Optimal Currency Composition of Debt 1: Protect Book Value

22.

Optimal Currency Composition of Debt 2: Protect Leverage

23.

Cyclicality of Currencies and Use of Options to Manage Credit Utilisation

24.

Managing the Depegging Risk

25.

Currency Risk in Luxury Goods

26.

Introduction to Credit Risk

27.

Counterparty Risk Methodology

28.

Counterparty Risk Protection

29.

Optimal Deposit Composition

30.

Prehedging Credit Risk

31.

xVA Optimisation

32.

Introduction to M&A-related Risks

33.

Risk Management for M&A

34.

Deal-contingent Hedging

35.

Introduction to Commodity Risk

36.

Managing Commodity-linked Revenues and Currency Risk

37.

Managing Commodity-linked Costs and Currency Risk

38.

Commodity Input and Resulting Currency Risk

39.

Offsetting Carbon Emissions

40.

Introduction to Equity Risk

41.

Hedging Dilution Risk

42.

Hedging Deferred Compensation

43.

Stake-building

WHAT HAS CHANGED IN THE SECOND EDITION

There are two main reasons that made us think about writing a second edition. Since the first edition of this book was published in 2012, much has changed in the world of corporate risk: the macroeconomic situation, for instance, due to low interest rates in the eurozone and higher rates in the US. Has this changed our view on the optimal fixed-floating mix? We decided to find out.

We also received many comments from our readers about parts of the first edition that could be expanded or clarified. For example, xVA charges, introduced after 2008 became a major consideration for long-dated derivatives, but there was no mention of them in the first edition. This omission has now been rectified.

We have added new chapters on equity risks, carbon emissions, risks from pegged currencies, optimal cash position and optimal leverage, and many others, 20 chapters in total. We also eliminated 12 chapters that do not seem relevant today. Other chapters have been radically rewritten and expanded for easier comprehension and completeness. Therefore, the book you now hold is much bigger and very different than the first edition.

WHAT HAS NOT CHANGED

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