rationale of management of risks:

theoritical and practical

• assess exposure risk
• develop a framework

 --------mitigation

----------hedging

----------diversification  

• establish capital investment monitoring 
• outline the application of probability analysis, sensitivity analysis , and monte carlo simulation to investment appraisal
• demonstrate an understand of the measurement and interpretation of project value at risk
• derivative market

sensitivity and simulation:

sensitivity only change one thing of the project and analysis the trend consist with this thing impact with the project

stimulation is the technology which will generate sereral times of the project's outcomes with change some of the factors.

sensitivity test:

sales-revenue-project

cost-cost to project

sales volum     contribution -project

simulation test   alter several factors(variables) at a time  inline with the expected probabilities

frequency (times of outcome generate with change of variables)

outcome of the project

the most important thing is the mean(average) and the spread of the curve   deviation--standard deviation it reflect the level of risk respectively

value of risk

1. mean and standard deviation
2. 0.5-(1-confidential level)
3. normal distribution table to find the coefficient with the result of step two
4. value of risk for a single year =mean-coefficient* standard deviation
5. multiple term value of risk =mean*years-(square root of years *standard deviation)

derivative:

hedging for foreign exchange rate and interest rate

derivative products: forward, future option swap..... fixed outcome in future date

future standardised exchange traded contract====which could be traded in open market  buy or sell