Introduction to Financial Risk Management

Intermediary: Mediator; Go-Between; a person who acts as a link between people in order to try and bring about an agreement; ↩︎

Cornerstone: Something Something fundamental or of primary importance ↩︎

Accord: Agreement between governments; An official agreement or treaty ↩︎

Basel I was published in 1988 and intended for implementation by 1992 ↩︎

Banking book: a term for assets on a bank’s balance sheet that are expected to be held to maturity, usually consisting of customer loans to and deposits from retail and corporate customers ↩︎

International Convergence of Capital Measurement and Capital Standards ↩︎

Prudential: Careful and avoiding risk ↩︎

Trading book: A financial institution’s accounting ledger that records all of its tradeable financial assets. Assets actively traded by banks include: Equities, Bonds, Commodities, FX and Derivatives ↩︎

Taxonomy: a scheme of classification ↩︎

Unencumbered: Free of debt or other financial liability ↩︎

Settlement risk is also called Herstatt risk after the German bank that went bankrupt in 1974 and didn’t honour its FX payments but received FX from their counterparties. ↩︎