fb
$20 Bonus + 25% OFF
$20 Bonus + 25% OFF
Securing Higher Grades Costing Your Pocket? Book Your Assignment at The Lowest Price Now!
Add File

Error goes here

BEO2431 Risk Management

tag 0 Download6 Pages / 1,317 Words tag Add in library Click this icon and make it bookmark in your library to refer it later. GOT IT

Question:

Q1     Identify and rank risk factors that are considered in financial institutions and non-banking cooperation.     

 (Maximum only one page with references)

10 Marks

Q2.  XYZ Property development Ltd is offered a choice of loan funds at the        following nominal interest rates:

            (1) 5.52% payable annually

            (2) 5.50% payable semi annually

            (3) 5.48% payable quarterly

            (4) 5.45% payable monthly

Which of these nominal interest rates provides the lowest cost of finance in terms of the corresponding effective annual interest rates?

2-Marks

Q3.    XYZ Company is considering three investments to invest $100,000: Bond, Stock mutual fund, fixed deposits:

  • The fixed deposits guaranteed to pay 5.5% return.
  • Stock mutual fund as 12%, 9% or -2% depending on whether market conditions are: good, average, or poor.
  • Bond 10%,8.7% or 3% depending on whether market conditions are: good, average, or poor.
  • XYZ company estimated the probability of a good, average, and poor market to be 0.3, 0.5, and 0,2 respectively.
  • What decision should be made according to the EMV decision rule?
  • What decision should be made according to the EOL (expected opportunity loss) decision rule?
  • How much XYZ company should be willing to pay to obtain a market forecast that is 100% accurate.
  • Draw a decision tree to this problem

5 Marks

Q4.      Share Valuation

            ABC Ltd pays annual dividends on its ordinary shares. The latest dividend of 32 cents per share was paid yesterday. The dividends are expected to grow at 3 per cent per year for the next two years, after which a growth rate of 2 per cent is expected to be maintained indefinitely. Estimate the value of one share if the required rate of return is 12 per cent.  

3- Marks

Q5     Option Pricing Model

Calculate the value of a three-month call option assuming the current price is $42, the strike price is $40, the risk-free interest rate is 3% per annum ((continuously compounding interest rate), and the volatility (σ2) is 22 % per annum.

4- Marks

Q6.    Binomial Option Pricing

One of the bank current share price is $42, and it will be worth either $45 or 38 in two months.  The risk free rate of interest is 4% (continuously compounding interest rate). What is the value of call option with an exercise of $43.  Find the hedge ratio and explain.

            4- Marks

Q7.    USE ONLY the CALCULTOR to answer the Following Questions. 

Mr. John expects to invest 20 million dollars on ABC and XYZ shares. He found the following annual stock return numbers for the period of 2013 to 2017.

What would be your investment recommendation for Mr. John based on risk and return measurements? (Hint you may have to calculate stock performances using average return, standard deviation, chances of obtaining negative return, geometric mean, cumulative wealth index, VaR (both parametric and non-parametric) and the SHARPE RATIO etc…)                                                                                                                 10-Marks

Date

ABC Stock Return

XYZ Stock Return

2013

2014

2015

2016

2017

-

0.49%

0.93%

1.77%

2.18%

-

-2.22%

5.66%

1.82%

0.31%

Suppose 10 million is invested in ABC stock and 10 million is invested in XYZ stock and calculate the VaR at 5% level of an equally weighted portfolio and compare the result with the individuals’ assets VaR values. Correlation between ABC return and XYZ return is (0.076). Consider Parametric Approach Only.  

2- Marks

Covariance Matrix

 

 

RABC

RXYZ

RASX200

RABC

0.0000442

 

 

RXYZ

0.0000145

0.000815

 

RASX200

0.0000174

0.000161

0.0000596


(a)   Calculate the optimal weights for A and B based on Minimum Risk approach.

     3 Marks

(b)    calculate the Systematic Risk (β) for share A and Share B and comment on these values

                                                                                                                     3 Marks                                        Q8.  Volatility Forecasting

  • Calculate the volatility (σ2) of ABC and XYZ Shares. The parameter l in the exponential weighted moving average (EWMA) σn2= l σn-12 + (1-l) U2n-1- model is 0.96. Forecast the 2018 Volatility of ABC using the 2016 and 2017 share prices 51.80 and 52.93 and Volatility of XYZ using share prices 67.14 and 67.35 with the aid of estimated volatility (σ2) and EWMA model?

3- Marks  

  • Write the GARCH (1, 1) model. Forecast the 2018 Volatility of ABC and XYZ shares using the 2016 and 2017 prices, estimated volatility and the given parameters of a GARCH (1, 1) model  ω= 0.000003, α=0.04, and β=0.82 and ω= 0.000002, α=0.05, and β=0.82.respectively 

3… Marks

  • Estimate the long-run average volatility of ABC and XYZ and comment on these values  2 marks
Download Sample Now

Earn back the money you have spent on the downloaded sample by uploading a unique assignment/study material/research material you have. After we assess the authenticity of the uploaded content, you will get 100% money back in your wallet within 7 days.

Upload
Unique Document

Document
Under Evaluation

Get Money
into Your Wallet

Total 6 pages, 1 USD Per Page

Cite This Work

To export a reference to this article please select a referencing stye below:

My Assignment Help. (2020). Risk Management. Retrieved from https://myassignmenthelp.com/free-samples/beo2431-risk-management/financial-risks.html.

My Assignment Help (2020) Risk Management [Online]. Available from: https://myassignmenthelp.com/free-samples/beo2431-risk-management/financial-risks.html
[Accessed 26 October 2021].

My Assignment Help. 'Risk Management' (My Assignment Help, 2020) <https://myassignmenthelp.com/free-samples/beo2431-risk-management/financial-risks.html> accessed 26 October 2021.

My Assignment Help. Risk Management [Internet]. My Assignment Help. 2020 [cited 26 October 2021]. Available from: https://myassignmenthelp.com/free-samples/beo2431-risk-management/financial-risks.html.


You probably require accounting help if your assignment is pertaining to M.Y.O.B. online. Since M.Y.O.B. (Mind Your Own Business Australia) has a widespread operation and cloud computing applications, the task might be challenging for you. Here is where experts at MyAssignmenthelp.com come in to gather factual information from various resources. Our academic writers will be able to provide M.Y.O.B. help through graphs, charts and financial reports. Moreover, we utilize powerful plagiarism software to check for the authenticity of the content. We strive to provide unique assignments to help the students earn exemplary grades.

Latest Management Samples

MPM755 Building Success In Commerce

Download : 0 | Pages : 9

Answers: Introduction The process of developing a successful business entity requires a multidimensional analysis of several factors that relate to the internal and external environment in commerce. The areas covered in this current unit are essential in transforming the business perspective regarding the key commerce factors such as ethics, technology, culture, entrepreneurship, leadership, culture, and globalization (Nzelibe, 1996; Barza, 2...

Read More arrow

SNM660 Evidence Based Practice

Download : 0 | Pages : 8

Answers: Critical reflection on the objective, design, methodology and outcome of the research undertaken Assessment-I Smoking and tobacco addiction is one of the few among the most basic general restorative issues, particularly to developed nations such as the UK. It has been represented that among all risk segments smoking is the fourth driving purpose behind infections and other several ailments like asthma, breathing and problems in the l...

Read More arrow Tags: Australia Maidstone Management Business management with marketing University of New South Wales Masters in Business Administration 

BSBHRM513 Manage Workforce Planning

Download : 0 | Pages : 20

Answer: Task 1 1.0 Data on staff turnover and demographics That includes the staffing information of JKL industries for the fiscal year of 2014-15, it can be said that the company is having problems related to employee turnover. For the role of Senior Manager in Sydney, the organization needs 4 managers; however, one manager is exiting. It will make one empty position which might hurt the decision making process. On the other hand, In Brisba...

Read More arrow

MKT2031 Issues In Small Business And Entrepreneurship

Download : 0 | Pages : 5

Answer: Entrepreneurial ventures Entrepreneurship is the capacity and willingness to develop, manage, and put in order operations of any business venture with an intention to make profits despite the risks that may be involved in such venture. Small and large businesses have a vital role to play in the overall performance of the economy. It is, therefore, necessary to consider the difference between entrepreneurial ventures, individual, and c...

Read More arrow Tags: Turkey Istanbul Management University of Employee Masters in Business Administration 

MN506 System Management

Download : 0 | Pages : 7

Answer: Introduction An operating system (OS) is defined as a system software that is installed in the systems for the management of the hardware along with the other software resources. Every computer system and mobile device requires an operating system for functioning and execution of operations. There is a great use of mobile devices such as tablets and Smartphones that has increased. One of the widely used and implemented operating syste...

Read More arrow Tags: Australia Cheltenham Computer Science Litigation and Dispute Management University of New South Wales Information Technology 
Next

5% Cashback

On APP - grab it while it lasts!

Download app now

*Offer eligible for first 3 orders ordered through app!

ribbon
callback request mobile
Have any Query?