Instituto Politécnico Nacional Escuela Superior de Comercio

y Administración
Unidad Santo Tomás

EQUIPO 5
Hernández Alcántara Katya
Sánchez López Efren Omar
Rodríguez Mendoza Brayan Alexis
Profesora: Vázquez Conde María Belén

5 DE SEMPTIEMBRE DE 2022
WORD DEFINITION IN ENGLISH and SOURCE. EXAMPLE

SPECULA To guess possible answers to a question when you do not have It's useless to speculate

enough information to be certain: without more information.
TE

PRICE OF The term stock price refers to the current price that a share of One other point of note that can
stock is trading for on the market.
STOCK significantly affect the stock price
is the mention of the company’s
name in the news, on social
media, or by word of mouth.
OPTION One thing that can be chosen from a set of possibilities, or Whichever option
the freedomto make a choice: we choose there'll
be disadvantages.

SWAP To give something and be given something else instead: When

you've finished reading your book,
and I've finished mine, can we
swap?

HEDGE A line of bushes or small trees planted very close together, espe She kicked the ball so powerfull

ciallyalong the edge of a garden, field, or road: y that it flew over the hedge.

PLUMMET To fall very quickly and suddenly: House prices have plummeted

in recent months.

LEVERAG The action or advantage of using a lever: Using ropes and wooden poles for

leverage,
E
they haul sacks of cement up
the track.
PARTIES
individual or group in a legal dispute
Neither party can back out once
the contract has been signed.

RENEGE To fail to keep a promise or an agreement, etc.: If you renege on the deal now,

I'll fight you in the courts.

LOSS The fact that you no longer have something or have less of There will

something: be substantial job losses if
the factory closes down.
 Introduction to Risk Management Exercise
Student’s name: Group: Team No.:
English complement subject: Delivery date:

Exercise 1: Fill in the blanks using the right word from the box
below.

swaps traded price of hogs futures mortgages

hedging underlying equity losses exchanges

For more than 30 years, derivatives have become increasingly important

in finance. (1) _futures_ and options are actively traded on many (2)
___exchanges______ throughout the world. Many different types of forward
contracts, (3) _____mortgages___, options, and other derivatives are
entered into by financial institutions, fund managers, and corporate
treasurers in the over-the counter market. Derivatives are added to bond
issues, used in executive compensation plans, embedded in capital
investment opportunities, used to transfer risks in mortgages from the
original lenders to investors, and so on. We have now reached the stage
where those who work in finance, and many who work outside finance, need
to understand how derivatives work, how they are used, and how they are
priced. Whether you love derivatives or hate them, you cannot ignore them!
The derivatives market is huge—much bigger than the stock market
when measured in terms of (4) ____underlying______ assets. The value of
the assets underlying outstanding derivatives transactions is several times
the world gross domestic product. As we shall see, derivatives can be used
for (5) _______traded_____ or speculation or arbitrage. They play a key
role in transferring a wide range of risks in the economy from one entity to
another. A derivative can be defined as a financial instrument whose value
depends on (or derives from) the values of other, more basic, underlying
variables. Very often the variables underlying derivatives are the prices of
(6) _____equity____ assets. A stock option, for example, is a derivative
whose value is dependent on the price of a stock. Since 1988, there have
been many developments in derivatives markets. There is now active trading
in credit derivatives, electricity derivatives, weather derivatives, and
insurance derivatives.
Derivatives can be dependent on almost any variable, from the (7)
_____price of hogs__________ to the amount of snow falling at a certain ski
resort. Many new types of interest rate, foreign exchange, and (8)
____swaps____ derivative products have been created. There have been
many new ideas in risk management and risk measurement. Capital
investment appraisal now often involves the evaluation of what are known as
real options. Derivatives markets have come under a great deal of criticism
because of their role in the credit crisis that started in 2007. Derivative
products were created from portfolios of risky (9) ______hedging______ in
the United States using a procedure known as securitization. Many of the
products that were created became worthless when house prices declined.
Financial institutions, and investors throughout the world, lost a huge
amount of money and the world was plunged into the worst recession it had
experienced for many generations. Further on there will be an explanation
on how securitization works and why such big (10) ______losses______
occurred. As a result of the credit crisis, derivatives markets are now more
heavily regulated than they used to be. For example, banks are required to
keep more capital for the risks they are taking and to pay more attention to
liquidity.