Risk Disclosure Document

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• Action Taken ReportThe reply an entity must upload on SCORES saying what it did about an investor complaint — it is routed straight to the complainant and starts the clock on their right to ask for a review.
• ArbitragerA participant who locks a profit by entering opposite transactions in two markets at once — carrying no exposure and taking no view, and in the process pulling the two prices back together.
• Basis riskThe risk left over after hedging, because the exposure and the contract used to hedge it do not move identically — in size, in expiry date, or in what they are written on.
• Central counterpartyThe clearing corporation that interposes itself in every exchange trade, becoming buyer to every seller and seller to every buyer, so neither side carries the other's credit risk.
• Code of conductThe conduct obligations a broker accepts as a condition of registration — integrity, due skill and care, no manipulation, and a specific list of duties owed to the client and to other brokers.
• Credit Default SwapA contract in which a protection buyer pays a regular premium to a protection seller, who agrees to pay any loss in value on a specified reference obligation if a credit event such as default occurs.