Posted: April 30th, 2020

Module Title Risk Management

1
Project Template
Module Title Threat Administration
Module Code 600577
Evaluation Component Project, 100%
Module Chief Professor Youwei Li
Phrase Depend NA
First Sit or Resit? First
Reassessment by resubmission or new
evaluation?
Resubmission
Submission Date
Please be certain that the submission date for the
major/closing module evaluation is ready throughout the
evaluation interval. The 2021/22 evaluation interval is:
 Trimester 1 – 10th January and 21st January
2022.
 Trimester 2 – 9
th Could and 27th Could 2022.
Solely interim module assessments can have submission
dates exterior of this era.
18 Could 2022
Take a look at studying outcomes:
LO1  Outline and critically talk about uncertainty and threat.
LO2 Determine various kinds of underlying threat in a enterprise context.
LO3  Design easy hedging methods utilizing derivatives.
LO4 Critically talk about threat administration methods and critically
consider their usefulness and limitations and potential difficulties in
their introduction into an organisation’s administration practices.
2
Evaluation of Threat Administration (Please reply ALL four
questions)
Query 1
a) Within the context of economic markets, outline a ahead contract and clarify the
circumstances through which it is perhaps advisable for a company to enter into
a ahead contract.
(four marks)
b) Focus on no less than three kinds of rate of interest derivatives aside from swaps and
describe the circumstances through which organizations ought to think about their
use.
(4marks)
c) Clarify CAPM and critically consider its use in threat administration. Clarify
the distinction between the systematic threat and the non-systematic threat of
an funding portfolio and talk about the extent to which diversification can
cut back the chance of a portfolio.
(6 marks)
d) Clarify the assorted potential makes use of of rate of interest swaps.
(three marks)
Query 2
a) Clarify how banks use inside credit standing techniques of their credit score threat
administration.
(four marks)
b) Outline Worth at Threat. Critically talk about the benefits and
disadvantages of Worth at Threat as a measure of threat. You have to select TWO
corporations listed on New York Inventory Trade, NASDAQ, London Inventory
Trade, or the Trade of the nation the place you come from, say Inventory
A and B. Obtain a minimal 61 days of value information of the 2 corporations A
and B ending February 2022. (1) What’s the 99%, 5-day VaR for a 1 million
greenback funding in inventory A? (2) What’s the 99%, 5-day VaR for a 1 million
greenback funding in inventory B? (three) What’s the 99%, 5-day VaR for a 1 million
greenback funding in inventory A and 1 million greenback funding in inventory B? (four)
What’s the good thing about diversification for the 99% VaR?
(eight marks)
three
c) On 20 April 2020, the value of 1 American oil futures contract
plunged to be adverse for the primary time in historical past. Clarify the explanations behind
this and critically talk about its implications on threat administration and funding.
(5 marks)
Query three
a) Clarify how the Black-Scholes Mannequin can be utilized as a device of threat
administration. Critically talk about the usefulness of Delta hedging and at
least two different Greek letters in threat administration.
(6 marks)
b) Focus on how you can apply non-arbitrage argument to cost a by-product
contract, use commodity and non-commodity futures contracts as
examples.
(5 marks)
c) Focus on the US inventory market turmoil throughout March and April 2020,
critically consider how you can handle the chance related to such occasions.
(6 marks)
Query four
You’ve got simply been appointed because the Monetary Director of a big worldwide
development firm which is enterprise main tasks in numerous
nations. The CEO can also be new and has a background in development and is
not notably educated about finance. He’s involved concerning the
international change dangers to which the corporate could also be uncovered.
a) Because the Monetary Director, you might be requested to jot down a briefing report for
the CEO explaining:
1) What international change dangers that firm could also be uncovered, and what
enterprise actions may be modified to scale back these dangers.
(12 marks)
2) What monetary devices can be utilized to scale back these dangers? In your
report it is best to give precedence to outlining essentially the most elementary and essential
monetary devices used for this objective.
(13 marks)
b) The most effective mates of the CEO works for a big funding financial institution. He
has suggested the CEO that one of the best ways to mitigate any international change dangers
dealing with the corporate is by extensively utilizing superior derivatives. He
four
notably has advocated the usage of Barrier Choices, Asian Choices and
Compound Choices. He says Swaps and Forwards are quaint and
outdated. He additional states that his financial institution is a pacesetter within the space of superior
derivatives and might implement an acceptable programme for cheap ongoing
charges.
Because the Monetary Director, you might be requested to jot down a notice to the CEO with the
following content material:
1) A concise rationalization of the operation, objective, and variations of
Barrier Choices, Asian Choices and Compound Choices.
(12 marks)
2) A crucial analysis of the feedback of the banker discussing whether or not
it acceptable to observe his recommendation.
(12 marks)
===== END =====
5
1. Evaluation standards
o Analysing related info in acceptable methods;
o Looking for educational help;
o Understanding the implications of each idea and empirics;
o Numerical expertise as are acceptable for the extent.
o Displaying functionality of integrating data and utilizing it to serve the
objective (persuasively argue for the factors you are attempting to make,
no matter it is perhaps).
2. Grading descriptors
First (>=70)
 Direct & penetrating in answering query, drawing on big selection of
related proof.
 Fluent, reasoned & sustained argument, with glorious use of
supporting proof.
 Glorious & crucial understanding of ideas of present conceptual
points, & of present debates &/or points in discipline of examine.
 Clear proof of crucial capability & of perception, perceptiveness &
originality. Intensive & complete info base.
 Clear proof of familiarity with related literature, together with current
analysis literature*.
 Vital ‘worth added’ to materials from lectures & prescribed studying.
Higher Second (60 – 69)
 Direct in answering query, drawing on vary of related proof.
 Reasoned & sustained argument, with efficient use of supporting
proof.
 Clear understanding of ideas, of present conceptual points, & of
present debates & or points within the discipline of examine.
 Proof of crucial capability & maybe some proof of perception or
perceptiveness.
 Large & sound info base.
 Proof of familiarity with related literature, together with the current
analysis literature*.
 Appreciable ‘worth added’ to materials from lectures & prescribed
studying.
Decrease Second (50 – 59)
 Solutions query, drawing on restricted vary of related proof.
 Some proof of capability to develop reasoned & sustained
argument, with ample use of supporting proof.
 Understanding of ideas & conceptual points. Restricted proof
of crucial capability.
 Enough info base.
 Proof of consciousness of related literature & of a few of the current
analysis literature*.
 Little or restricted ‘worth added’ to materials from lectures & prescribed
studying.
Third (40 – 49)
 Makes an attempt to reply query, however might digress at instances & might have
restricted consciousness of implications of query.
6
 Argument not at all times absolutely reasoned or sustained, maybe with restricted
use of supporting proof.
 Restricted understanding of ideas & conceptual points.
 Little or no proof of crucial capability.
 Restricted &/or shaky info base.
 Little consciousness of related literature, with little or no consciousness of the
current analysis literature*.
 No important ‘worth added’ to
Fail (<40)
 Doesn’t reply query straight, or does so with weak &/or flawed
argument.
 Little understanding (or misunderstanding) of ideas.
 Poor info base, maybe with factual errors.
For extra info, please discuss with UG Programme Handbook.
7
Evaluation Submission (for scholar info)
eSubmission is the accepted technique to your programme of examine. You have to
hand in your assessed Project(s), for all modules that you’re taking
throughout the 2021/22 Tutorial Yr utilizing the Canvas system. Submission of
a printed copy is NOT allowed. You must submit by way of the Assignments
menu merchandise on the related module Canvas web site.
Assignments should be submitted by the date and time stipulated. Deadlines
will likely be strictly adhered to. College students submitting late, and who do not need
mitigating circumstances accepted by the Mitigating Circumstances Panel, will
be topic to penalties for late submission specified by the College. Please
notice that Saturday and Sunday are handled as “working days” for the needs
of the late submission coverage.

————

1 Template for Project

Threat Administration is the module title.

Module Quantity 600577

100% on Evaluation Component Project

Professor Youwei Li is the module chief.

NA Phrase Depend

Is it higher to sit down first or to resit? First

Reassessment by way of resubmission or recent submission

evaluation?

Resubmission

Date of Submission

Please confirm that the deadline for submission of the

major/closing module evaluation is ready throughout the

evaluation interval. The 2021/22 evaluation interval is:

 Trimester 1 – 10th January and 21st January

2022.

 Trimester 2 – 9

th Could and 27th Could 2022.

Solely interim module assessments can have submission

dates exterior of this era.

18 Could 2022

Take a look at studying outcomes:

LO1  Outline and critically talk about uncertainty and threat.

LO2 Determine various kinds of underlying threat in a enterprise context.

LO3  Design easy hedging methods utilizing derivatives.

LO4 Critically talk about threat administration methods

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