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question 5

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Definitions:

Financial Risk Management

The practice of protecting economic value in a firm by using financial instruments to manage exposure to risk, particularly credit risk and market risk.

Interest Rate Collar

A risk management strategy used to limit exposure to interest rate fluctuations by setting upper and lower bounds.

Risk Exposure

Risk exposure is the measure of potential future losses that may result from business activities or investment decisions, due to risks that have been taken.

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