Knowledge Base: Risk Management Of Alternative Investments

Liquidity Risk involves the inability of a firm to fund its illiquid assets. Liquidity risk is directly linked with credit and market risks, which become uncontrollable because of delayed redemptions.

Volatility Risk refers to the impact on a portfolio of the unexpected changes in volatility. On the one hand, volatility risk involves changes in derivatives’ prices due to the unpredictable changes in the volatility of the underlying assets.

Concentration risk arises because of increased exposure to one trading strategy or a group of correlated assets. Commonly, concentration risk is understood as exposure to a linked group of assets

Strategy Risk implies changes in the employed trading strategies, which, in turn, leads to increased risks of other categories...

Operational Risk arises from errors that can be made in instructing payments or settling transactions. In practice, all institutions are exposed to it, while the sources are ample and diverse.

Legal Risk refers to the risk of loss from a contract that cannot be legally enforced. It arises through uncertainty in laws, regulations, and legal actions.

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