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  • Risk Management Is Not Modern Invention

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    nicasavio2725
    4 tayangan3 halaman
    Risk management has existed for a long time, as seen with the Egyptian Pharaoh hedging risk and the creation of futures markets in the Middle Ages. Today, large publicly held companies are major users of risk management tools to hedge their risks, though it is debated whether corporations need to reduce their own risks since investors can manage risks individually. The Franco Modigliani and Miller theorem found that financial decisions only impact how value from real investments is distributed, not the total value created.

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    Risk management has existed for a long time, as seen with the Egyptian Pharaoh hedging risk and the creation of futures markets in the Middle Ages. Today, large publicly held companies are major users of risk management tools to hedge their risks, though it is debated whether corporations need to reduce their own risks since investors can manage risks individually. The Franco Modigliani and Miller theorem found that financial decisions only impact how value from real investments is distributed, not the total value created.

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    4 tayangan3 halaman

    Risk Management Is Not Modern Invention

    Diunggah oleh

    nicasavio2725
    Risk management has existed for a long time, as seen with the Egyptian Pharaoh hedging risk and the creation of futures markets in the Middle Ages. Today, large publicly held companies are major users of risk management tools to hedge their risks, though it is debated whether corporations need to reduce their own risks since investors can manage risks individually. The Franco Modigliani and Miller theorem found that financial decisions only impact how value from real investments is distributed, not the total value created.

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    © All Rights Reserved
    Unduh sebagai PPT, PDF, TXT atau baca online dari Scribd
    Tandai sebagai konten tidak pantas
    dari 3

    From Pharaoh to Modern

    Finance
    Risk management is not modern
    invention

    The Story of the Egyptian


    Pharaoh
    In the Middle Ages, hedging was
    made easier by the creation of
    future markets
    Large publicly held companies
    have emerged as the principal
    users of risk management
    instruments

    Most new financial products are designed


    to enable corporations to hedge more
    effectively
    It is not clear, why a corporation would
    want to hedge?
    The Modern Corporation and Private
    Property book : the modern corporate
    from organization was developed precisely
    to enable entrepreneurs to disperse risk
    among many small investors IF TRUE,
    its hard to see why corporations
    themselves also need to reduce risk
    investors can manage risk on their own

    Until
    1970s,
    finance
    specialists
    accepted this logic
    Franco Modigliani & Miller Theorem
    :
    1.

    The value is created on the left hand side of


    the balance sheet when companies make good
    investments (plant and equipment, R&D, or
    market share) that ultimate increase operating
    cash flows.

    These decisions about financial policy


    can affect only how the value created
    by a companys real investments,
    not for capital market

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