Kindly go through: Sue Ellicott supervises the trading function at an asset management firm. In conducting an in-house risk management training session for traders, Ellicott elicits the following statements from traders: Trader 1. ''Liquidity risk is not a major concern for buyers of a security as opposed to sellers.'' Trader 2: ''In general, derivatives can be used to substantially reduce the liquidity risk of a security.'' Ellicott and the traders then discuss two recent cases of a similar risk exposure in an identical situation that one trader (Trader A) hedged and another trader (Trader B) assumed as a speculation. A participant in the discussion makes the following statement concerning the contrasting treatment: Trader 3: ''Our traders have considerable experience and expertise in analyzing the risk, and this risk is related to our business. Trader B was justified in speculating on the risk within the limits of his risk allocation.'' 10.3 Test your Knowledge (Question): State and justify whether each trader's statement is correct or incorrect