Measuring and managing market, credit and Op risk [6]

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Bullet points include: Usually focus is on market value of contingent claims Problematic when market value becomes less well defined, c.f. liquidity risk If V(X) is the value of a given set of contingencies X then we generally need:  I.e. Principle of No Arbitrage or Law of One Price which Kemp (2009) refers to as Axiom of contemporaneous value continuity ‘Arbitrage’ has several different meanings in financial circles  Axiom is only interested in position at each point in time in turn, not how risk appetite might evolve through time or whether evolution appears ‘rational’

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