财务风险管理代写 MANAGEMENT OF FINANCIAL RISK代写

MANAGEMENT OF FINANCIAL RISK

DURATION: 120 MINUTES (2 HOURS)

财务风险管理代写 This paper contains THREE questions. Answer TWO questions. If you attempt more questions than required, only the required number of answers

This paper contains THREE questions.

Answer TWO questions.

If you attempt more questions than required, only the required number of answers will be marked. Please strike through any answers that you do not wish to be marked. If you do not do this the marker will mark the answers in the order that they appear in your exam booklet(s).

An outline marking scheme is shown in brackets to the right of each question.

Only University approved calculators may be used.

A foreign language direct ‘Word to Word’ translation dictionary (paper version) ONLY is permitted provided it contains no notes, additions or annotations.

Normal Distribution Tables will be provided.

A formula sheet will be provided.

1. 财务风险管理代写

(i)

What is Value at Risk (VaR) and what question is being asked in VaR? [10 marks]

(ii) Which are the properties of a coherent risk measure and which of these properties does VaR fail? [10 marks]

(iii) Suppose the daily changes for a portfolio have firsorder autocorrelation parameter 0.12. The 10-day VaR, calculated by multiplying the one-day VaR by √10, is £2 million. What is a better estimate of VaR that takes into account the autocorrelation? [15 marks]

(iv) The change in the value of a portfolio in three months is normally distributed with a mean of £500,000 and a standard deviation of £3 million. Calculate the VaR and the expected shortfall (ES) for a confidence level of 99.5% and a time horizon of three months. Note: ⁻¹(0.995) = 2.576 [15 marks]

2. 财务风险管理代写

(i) Discuss whether hedge funds are good or bad for the liquidity of markets. [15 marks]

(ii) Consider the following two events:

(a) A bank loses £1 billion from an unexpected lawsuit relating to its transactions with a counterparty, and

(b) An insurance company loses £1 billion because of an unexpected hurricane.

Suppose that you have the same investment in shares issued by both the bank and the insurance. Which losses you are more concerned about? Why? [15 marks]  

(iii) Discuss why there are differences between the realword (physical) and risk-neutral probabilities. [20 marks]

3. 财务风险管理代写

(i) What is the delta of an underlying asset? What does delta-neutral mean? [10 marks]

(ii) What is the gamma of the underlying asset? For which options is gamma the greatest? [10 marks]

(iii) What does Girsanov’s theorem show? [15 marks]

(iv) Explain the differences between the Hazard Rate and Unconditional Default Probability. [15 marks]

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