Risk management and financial institutions, Risk Management

 On September 25,2008 a portfolio worth $10 million consisting of investments in four stock indices: DJIA, FTSE 100, CAC 40 and NIKKEI 225. The value of the investment in each index o September 25, 2008 is shown in Table 12.1.  An excel spreadsheet containing 501  days of historical data on the closing prices of the four indices and a complete set of Var are on the authors website:

Investment portfolio used for VaR Calculations.

Index                                       Portfolio Value ($000s)

DJIA                                          $4,000

FTSE 100                                  $3,000

CAC 40                                     $1,000

Nikkei 225                                  $2,000

Total                                          $10,000

Table

Scenarios generated for September 26, 2008

Scenario Number   DJIA       FTSE100   CAC 40    Nikkei 224   Portfolio Value (000s) Loss ( $000s)

1                          10,977.08  5,187.46     4,236.71  12,252.62    10,021.502                   -21.502

2                          10,925.97   5,234.87    4,275.48   12,155.54     10,023.327                  -23.327

3                           11,070.01  5,164.10     4,186.01   11,986.84    9,985,478                    14.522                             

.

.

499                       10,831.43  5,057.36   4,117.75   12,030.80         9828.450                   171.550

500                        11,222.53  5,300.42  4,342.14     11,899.00       10,141.826               -141.826

 

2) Ch 19 problem 19.13 Discuss whether hedge funds are good or bad for the liquidity of markets.

 

3) CH 20 problem 20.15 Suppose that a financial institution uses an imprecise model for pricing and hedging a particular  type of structured product. Discuss how, if at all, it is likely to realize its mistake.

4) CH20 problem 20.16 A Future prices is currently at $40. The risk-free interest rate is 5%. Some news is expected tomorrow that will cause the volatility over the next three months to be either 10% or 30%. There is a 60% chance of the first outcome and a 40% chance of the second outcome. Use the derivaGem Software to calculate a volatility smile for three-month options.

Posted Date: 3/6/2013 1:04:20 AM | Location : United States







Related Discussions:- Risk management and financial institutions, Assignment Help, Ask Question on Risk management and financial institutions, Get Answer, Expert's Help, Risk management and financial institutions Discussions

Write discussion on Risk management and financial institutions
Your posts are moderated
Related Questions
Probelm 1: Describe the factors that should be considered when conducting risk assessment in a confined space. Probelm 2: (a) Distinguish between workplace-based and

Explain the Risk management strategies Retain the risk If risk is small and won't affect company's profits, company does very little and lives with i

Risk free assets is one for which there is no uncertainty in its expected rate of return and hence the standard deviation of such return is zero. Generally the expected rate of ris

Question: Company XWS employs 220 workers. During an inspection exercise carried out by the relevant authority, it was found that the employer had not conducted its risk assess

Question: (i). Describe the term ‘ecosystem' (ii). What are the major ecosystems in the tropical marine environment. (iii). State and describe four main ecological/eco

What is Systematic Risk Variability in a security's total returns which is directly associated with overall  movements  in  the  general  market  or  economy  is  known as syst

Question 1: (a) What are Upper Limb Disorders? (b) Describe seven main factors that are likely to increase the risk of upper limb disorders at work and suggest ways for redu

Determine the roles and responsibilities for risk management at senior management level • The role and contents of the risk management strategy, including risk profile, risk app

What is Industry Risk An industry may be viewed as group of companies which compete with each other to market a homogeneous product. Industry risk is that portion of an  inv

On successful completion of FSAP, the EC concluded that the EU FS industry still had strong untapped economic and employment growth potential. As a result, the White Paper on Finan