How can multinational private equity and alternative asset

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Reference no: EM131907355

How can an multinational private equity and alternative asset management company like The Blackstone Group hedge the following risks to limit their loses in adverse cases?

1. Market Risk: Market risk can occur due to substantial changes in the general market (that the company is operating in), or changes in the entire economy as a whole.

2. Interest Rate Risk: Interest rate risk occurs when market interest rates fluctuate and affect the returns on company's assets or their long term debt.

3. Liquidity Risk: Liquidity risk refers to company's ability to meet their short term financial obligations in normal conditions and in distressed economy where everyone is looking to cash in their investments.

4. Credit Risk: Credit risk refers to the fact that the loan borrowers may default on their obligations.

5. Operational Risk: Managers not fulfilling their duties or not utilizing the companies capital efficiently, causing major losses.

6. Currency Risk: This type of risk refers to fluctuations in foreign exchange market. A company like The Blackstone group is exposed to this risk because it invests in many countries outside the United States.

7. Geopolitical Risk: Geopolitical risk can occur when the relationship between countries is affected by the geography and economics between the countries and it results in major losses for companies like Blackstone group because they may have investments in both affected countries.

Please explain briefly what strategies can The Blackstone Group use to hedge all of these risks so that when an adverse condition arises, The Blackstone Group has limited losses.

Reference no: EM131907355

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