Asset Risk Vs. Liability Risk

CFA Level II
#1

What the F’ is the difference between these two? I found a question from an actual CFA exam refering to this for Corporate Finance. Does anyone know the diff between these? I couldnt find a refrence to this anywhere. Best, AFJ

#2

Asset risk – mgmt misuses corporate assets. Like they will use the corporate jet to go party. Liability risk is that they will take on excessive obligations including off balance sheet liabilities To me liability risk seems to overlap with strategic policy risk

#3

I think having a lot of operating leases that should (but are not) capitalized would be an example of a liability risk. I can’t think of an example of Asset Risk. Strategic policy risk occurs when managers take on acquisitions that benefit themselves and not shareholders.

#4

I read in an explanation that this is no longer in the cirriculum. this was from a question on the 2006 exam.

#5

Asset risk would include misuse of the corporate jet, etc.

#6

Thats easy enough to remember for asset risk, thanks dapper/mcleod.

#7

I think this is still in CF. I just had a question on this today in the 2006 exam.

#8

Since we all are killing various risks on this thread… What is Real Exchange Rate Risk?

#9

Exchange rate risk not explained by inflation differentials.

#10

LOCK!

#11

Not a lock, but I have a chance. I you would have offered that 80 days ago when I started I would have taken it. You are a lock man.

#12

This is still in the corporate fnance readings. It’s reading 33.

#13

Yeah…I thought it was in CF somewhere.

#14

ohh wow… look at this… real S = nominal S * (FC price Level / DC price Level) any intuition behind this?

#15

dinesh.sundrani Wrote: ------------------------------------------------------- > ohh wow… look at this… > > real S = nominal S * (FC price Level / DC price > Level) > > any intuition behind this? Nominal spot is DC/FC * (FC price Level / DC price Level) It just takes the spot and backs out the price levels. You can then compare another real spot rate at some future time to see if they are the same. If they aren’t then inflation didn’t explain the movement competely.

#16

Thanks mwvt, now I know where this formula is taking me too…