Instructions on Assessment
This assignment accounts for 80% of the overall mark for the module. You must attempt all
the parts to meet the learning outcomes.
• Length maximum of 3000 words (with a tolerance level of 10%) which must be stated
at the cover page of the assignment.
• Quotations of more than 2 lines must be indented and in italics with the reference
and page number stated. Shorter quotations should be in italics but do not need to be
indented.
• Tables and diagrams should be inserted at an appropriate point in the text and
should be easily readable.
• All the results, their interpretation and discussion should be provided in a single MS
Word document.
Programme: BA (Hons) Finance and Investment Management
BA (Hons) International Banking and Finance (Top-up)
BA (Hons) Business and Finance (Top-up)
Module Code: AF6003 and LD6008
Module Title: Banking Risk 1
Submission Time and Date: 12th January 2022
Word Limit: 3,000 words
Weighting This assignment accounts for 80% of the total mark for this
module
Submission of Assessment Electronic Management of Assessment (EMA): Please
note that your assignment is submitted electronically online
via Turnitin by the given deadline. You will find a Turnitin link
on the module’s ELP site.
It is your responsibility to ensure that your assignment arrives
before the submission deadline stated above. See the
University policy on late submission of work.
2
A. Market Risk
You recently read the paper by Sollis (2009) where the author provides introductory
overview of Value at Risk (VaR) and its weaknesses. This encouraged you to
understand more about VaR techniques and on their application. You have therefore
decided to study more on VaR and apply related techniques to compute the risk
exposure faced by a portfolio of real-world financial securities.
In this section of your report, you are therefore required to critically discuss market risk
measurement using Value at Risk techniques and discuss the new developments,
displaying your awareness of the methods and limitations by presenting clearly how
you derived your results.
Your portfolio should consist of a minimum of five real-world companies and the length
of your sample period should be no longer than five years and must end as of 30th
November 2021. Please note your answer should not just be an illustration of the
methods but you should aim to provide interpretations and comparisons capturing your
data and latest published research.
(1,500 words, 50 Marks)
*Sollis, R. (2009). Value at risk: a critical overview. Journal of Financial Regulation and
Compliance.
B. Credit Risk
Analyse a portfolio of loans consisting of 3 companies of your choice with
characteristics shown in table below. For example, if you choose company 1 to be
Tesla, it will have a maturity of 5 years, repayment value of 12 million and annual
interest rate of 6%. All computations must be carried out according to such
characteristics.
Loan Company Name Maturity Repayment Value at
Maturity $m
Annual
Interest
1 Company 1 5 12 6%
2 Company 2 4 10 7%
3 Company 3 3 8 5%
In your report, you should clearly state the composition of your portfolio (i.e., fill in the
table above with the names of three real-world companies).
Assume that all three loans are senior unsecured debt denominated in US dollars and
that the analysis is conducted on 30th November 2021. The loan will be repaid at
maturity date. Clearly state any assumptions you make in your estimations.
Using CreditMetrics (full implementation) and KMV, you are required to compute
relative VaR and Expected Shortfall with MonteCarlo simulation for the portfolio above
at time horizons of 1-year and 2-year periods and confidence interval of 99%.
Interpret, compare, and discuss your results critically. Do a reality check on all the
above calculations. Are your results according to your expectations? Why or why not?
(1,500 words, 50 Marks)
3
Mapping to Programme Goals and Objectives
Programme (Level) Learning Outcomes that this module contributes to:
Knowledge & Understanding:
• Assess knowledge of contemporary professional practice in business and
management informed by theory and research. [LO1.1]
• Appraise knowledge of business and management to complex problems in
professional practice in order to identify justifiable, sustainable and responsible
solutions [LO 1.2]
Intellectual / Professional skills & abilities:
• Critique creative and critical thinking skills that involve independence, understanding,
justification and the ability to challenge the thinking of self and others [LO 2.2.]
Personal Values Attributes (Global / Cultural awareness, Ethics, Curiosity) (PVA):
• Critique their personal skills and attitudes for progression to post-graduate contexts
including professional work, entrepreneurship and higher-level study [LO 3.2]
Module Specific Assessment Criteria
Knowledge & Understanding:
• Develop knowledge and understanding of international banking regulation, credit,
foreign exchange and market risks. [MLO1]
• Critically evaluate the measurement models and the management issues in the context
of the regulatory requirements within the banking and finance sector. [MLO2]
Intellectual / Professional skills & abilities:
• You will develop the quantitative as well as qualitative skills while measuring and
managing the credit and market risks. [MLO3]
Personal Values Attributes (Global / Cultural awareness, Ethics, Curiosity) (PVA):
• You will be made aware of the risk facing international financial markets and how you
can equip management with the knowledge and expertise to implement stronger
organisational controls to address these risks. [MLO4]
Banking+Risk+Assignment+Brief
APA
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The post You recently read the paper by Sollis (2009) where the author provides introductory overview of Value at Risk (VaR) and its weaknesses. This encouraged you to understand more about VaR techniques and on their application. You have therefore decided to study more on VaR and apply related techniques to compute the risk exposure faced by a portfolio of real-world financial securities. In this section of your report, you are therefore required to critically discuss market risk measurement using Value at Risk techniques and discuss the new developments, displaying your awareness of the methods and limitations by presenting clearly how you derived your results. Your portfolio should consist of a minimum of five real-world companies and the length of your sample period should be no longer than five years and must end as of 30th November 2021. Please note your answer should not just be an illustration of the methods but you should aim to provide interpretations and comparisons capturing your data and latest published research. appeared first on Apax Researchers.