management of risk project questions
risk management代写 For questions 1, 2 and 3 you will need to consider a portfolio of sovereign loans as indicted in Appendix A.
As part of this project you will need to answer all the questions shown below. For questions 1, 2 and 3 you will need to consider a portfolio of sovereign loans as indicted in Appendix A. You should assume that your analysis is conducted on 2 nd December 2019. All the data you need to collect will have to be consistent with such date. State the assumptions, if any, you need to make to carry out your calculations and explain why, in your opinion, they are sensible.
1.[10% weight]. After reviewing relevant industry papers (e.g. from regulators and/or practitioners) and the financial press, describe the macro-economic challenges facing each country in your portfolio [max 200 words per country].
Question2: risk management代写
2.[30% weight] Calculation of the risk of a sovereign loan portfolio.
With the CreditMetrics model compute 95%, 99% and 99.9% relative (from the mean) VaR and ES for the portfolio of sovereign loans assigned to your group (see Appendix A). Use a time horizon of 1 year, 10,000 Monte Carlo simulations and a 30% asset correlation.[Note: Relative VaR in CreditMetrics is computed as E(V)-V* where E(V) is the expected value of the 1-year forward portfolio value and V* is the simulated 1-year forward portfolio value at the 5%, 1% and 0.1% percentiles, respectively. Relative expected shortfall is computed as E(V)-V** where V** is the average of the 1-year forward portfolio values below V*. ]
Explain why you think that your results are plausible.
Portfolios are composed of exposures to Turkey, Argentina, Brazil and Venezuela. To implement CreditMetrics you will need the following information:
i. Zero coupon government yields. You can find the 3 month and 10 year yields in the Economist (see Appendix B). The yields for the relevant maturities in your analysis can be derived from the 3 month and 10 year yields by interpolation. Assume that all yields refer to debt denominated in US dollars.
ii. Country ratings should be sourced via the Moody’s website. Simply select “look up a rating” from the “Research and Ratings” tab. You will need to register with Moody’s to have access to the rating information. Registration is free.
iii. Sovereign default rates and recovery rates can be obtained from the document “Sovereign Default and Recovery Rates, 1983-2018” which can be downloaded from the Moody’s website.
Question3: risk management代写
3. [20% weight] Stress testing: Compute the 95%, 99% and 99.9% relative VaR and ES for your portfolio under the following stress scenarios. Consider the effect of each scenario separately and then all combined.
a. Assume all the sovereigns represented in your portfolio are downgraded to Caa-C (unless they already have that rating in which case they will keep Caa-C).
b. Assume that yields increase by 10% across all maturities (i.e. if a current yield is 7% it will go to 17%).
c. Assume asset correlation goes to 80%.
d. Explain why you think that your results in all the above points are plausible.
4. [40% weight] Review the IMF’s Regulatory reform 10 years after the global financial crisis: looking back, looking forward and other relevant material on the topic which can be drawn from academic papers, (e.g. from Science Direct) industry papers (e.g. from regulators and practitioners) and the financial press. Answer the following questions:
a. What is your assessment of the capital and leverage regulation that was introduced following the financial crisis? [max 400 words]risk management代写
b. What is your assessment of the systemic risk regulation that was introduced following the financial crisis? [max 400 words]
c. In your opinion, what are the main regulatory challenges going forward? [max 400 words]
d. In your opinion, why can FinTech have important risk management implications for financial institutions? [max 400 words]
Add the word count in each sub-question.risk management代写
In your answer to each sub-question you should include one figure or table that best illustrates one or more of the key points you are discussing. Follow these stylistic guidelines. Figures and tables can be taken from existing published material, in which case the source needs to be acknowledged in the figure/table legend, or built by yourself with data you may obtain from Bloomberg, Reuters, Datastream or other services. Tables’ and figures’ legends should not be included in the word count.
If you have queries concerning the project you can contact me via email or in person during my office hours. Please bear in mind that data collection is your responsibility and forms part of the assessment for your project.risk management代写
Please see the attached 2019-2020 MoR Project file for Appendix A and B.
As part of the assessment for this project you will need to submit:
1.An Excel spreadsheet with all your calculations. The spreadsheet should be tidy and easy to read. The Excel file should also include all the raw data indicated in the data section below. The data provider and data identifiers (i.e. DataStream or Reuters securities codes) should be reported so that we can verify what you have done. In the spreadsheet you should clearly explain what you are doing. You should label data/results and comment on your calculations.
2. A Word document with a separate answer to all the above questions 1-4. The word document should be self-contained so that the reader will not need to refer back to the Excel file. In other words, all the main results discussed in the Word document should be reported and summarised in it. Each answer should be clearly labelled with the number of the question or sub-question it refers to.