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November/December 1997, 
Vol. 79, No. 6
Posted 1997-11-01

The New Risk Management: The Good, the Bad, and the Ugly

by Philip H. Dybvig and William J. Marshall

At one time, risk management was limited to insurance and the avoidance of lawsuits and accidents. The new risk management also includes using tools developed for pricing financial options for the management of financial risks within the firm. Trading in financial markets based on these tools can insulate companies from the risk of changes in interest rates, input prices, or currency fluctuations. In this article, the authors introduce the new risk management and the policy choices firms should be considering.





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