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How Financial Firms Manage Risk

In the article "How Financial Firms Manage Risk," Jose A. Lopez identifies four common risks that financial firms face and assesses the differing importance of these risks across different types of financial firms: commercial banks, securities firms, and insurance companies.

  1. Identify and explain the four common risks faced by financial firms.

  2. What is a financial holding company?

  3. Suppose an existing financial firm obtains permission to become a financial holding company. How would the firm’s risks and risk management practices be altered if it were originally: (a) a commercial bank? (b) A securities firm? (c) A life insurance company? (d) A non-life insurance company?

Source: “How Financial Firms Manage Risk.” Jose A. Lopez, Federal Reserve Bank of San Francisco FRBSF Economic Letter, No. 2003-03, February 14, 2003, pp. 1-3.


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