Samenvatting

The concept of risk and the practice of financial risk management are important factors in the present-day financial world. Handbooks explain this focus on risk as a reaction to increased volatility of prices, interest rates and exchange rates since the early 1970s. Financial economists have developed mathematical models and quantitative techniques to hedge the risks of financial transactions. The financial innovations developed in this process, so-called derivatives, are derived from older forms of intertemporal transactions, such as options, futures, forwards and warrants. The use of derivatives has grown rapidly since the early 1970s. A number of authors has pointed out that the widespread use of these financial instruments to hedge risks at the level of banks and corporations has increased systemic risk at the macro-level. Some authors think that risk management is principally impossible, as uncertainty reigns the world. Others have pointed out that financial organizations have used derivatives not only for risk management, but also for other less lofty organizational purposes, such as creating excessive credit and taking highly leveraged positions. While this criticism is generally valid, it should be realized that the use of quantitative techniques and the practice of derivatives cannot be banned from the present-day financial world.