Business risk and Front-running: Difference between pages

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==== Business risk generally ====
''Conduct risk - financial markets''


In its broadest sense, business risk means set of risks taken by a business in choosing to operate in a commercially competitive environment, launching a new product or investing in new equipment.  
In financial services, front-running is the unethiclal and likely criminally fraudulent practice of buying securities or making other trades to take advantage of private/confidential knowledge of a future event, for example a large purchase order from a client - an order for currency, shares, commodities, etc.


These decisions are risky and they may or may not result in the expected reward, they may even result in extreme cases in the failure of the wider business. Many firms attempt to limit the scale of this risk by restricting the range of their business activities to their core competences.
Distinguishing front-running (unacceptable, probably illegal) from [[pre-hedging]] (probably aceptable, even legal) is important for all concerned, but can be very difficult.  




==== Business risk in the Capital Asset Pricing Model ====
==See also==
* [[Conduct risk]]
* [[FMSB]]
* [[Insider dealing]]
* [[Layering]]
* [[Market corners]]
* [[Pre-hedging]]
* [[Ramping]]
* [[Spoofing]]
* [[Squeeze]]
* [[Wash trading]]


In the capital asset pricing model (CAPM) 'business risk' means the component of total risk which arises from the business operations of a company which has issued shares or other securities.
[[Category:Context_of_treasury]]
 
[[Category:Accounting,_tax_and_regulation]]
Business risk in the CAPM is measured by the ungeared beta of the business.
[[Category:Ethics_and_corporate_governance]]
 
[[Category:Ethics]]
Risk in this CAPM context is defined narrowly to mean the variability of the company's share returns compared with the returns of the market as a whole, as if the company had no debt.
[[Category:Financial_risk_management]]
 
 
 
==== Business risk for financial regulatory purposes ====
 
Any potential impairment of the regulated entity's financial position:
#Resulting from a decline in revenues
#Or an increase in expenses
#Leading to a loss
#That must be charged against capital.
 
 
 
 
== See also ==
* [[Asset beta]]
* [[Beta]]
* [[Capital asset pricing model]]
* [[Commercial risk]]
* [[Equity risk]]
* [[Financial risk]]
* [[Operational risk]]
* [[Risk taxonomy]]
* [[Ungeared beta]]
 
__NOTOC__
 
[[Category:Corporate_finance]]
[[Category:Compliance_and_audit]]
[[Category:Manage_risks]]

Revision as of 09:55, 28 February 2018

Conduct risk - financial markets

In financial services, front-running is the unethiclal and likely criminally fraudulent practice of buying securities or making other trades to take advantage of private/confidential knowledge of a future event, for example a large purchase order from a client - an order for currency, shares, commodities, etc.

Distinguishing front-running (unacceptable, probably illegal) from pre-hedging (probably aceptable, even legal) is important for all concerned, but can be very difficult.


See also

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