Exhibit – Risk Management

Execution Risk:
– Slippage
– Human errors, typos
o Sell instead of buy
o Wrong qty
o Wrong security
⇒ Check account daily, keep position size within limits
⇒ Close erroneous position immediately

Disaster Risk:
– Loss of power, internet
– Virus on PC
– Brokerage account gets hijacked
– Terror acts
– Natural disasters
⇒ Telephone number, Iphone App to close all positions, keep position sizes within limits

Event Risk / Tail Risk:
– Overnight gaps of one of my positions
– Big US company goes unexpectedly bankrupt
– Some type of accounting scandal of a major US company
⇒ Keep position sizes within limits

Correlation:
– All my long and short positions move in the wrong direction
– Am exposed to one direction and all stocks move into the opposite direction
⇒ I consider risk as the sum of all risks in each positions and do not net
⇒ I re-check my PF to avoid clustering in one set-up, one instrument, one industry etc.

Liquidity Risk:
⇒ Screening stocks > min. price and min. market size, keep position sizes within limits

Regulatory Risk:
– Short sale ban
– Trading halt
⇒Keep positions sizes within limits

Financial risk:
– Broker goes bankrupt
⇒ Assets in account should be protected, cash not sure, but I have also assets beyond my trading account

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