Question 1a an increasingly popular risk analysis technique

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Reference no: EM13348193

QUESTION 1

a) An increasingly popular risk analysis technique is VAR. Explain, illustrate and assess this technique.

b) Discuss what strategies can be used as risk planning tools?

c) Describe the following techniques and state in what part of risk management process they fit in-

Sensitivity Analysis
Risk Maps
Risk Questionnaires

QUESTION 2

a) Describe how the practice of risk management similar and different to hedging?

b) "Risk philosophy and risk appetite must go in hand in hand to ensure that the organisation has strength and vitality." Discuss

c) Clearly explain the following terms:

Currency option,
Future contracts
Operational risk under Basel II
Stress testing

d) The stock of B Ltd, performs relatively well to other stocks during recessionary risks. The stocks of C ltd on the other hand, does well during the growth periods. The stock of B Ltd and C ltd are currently selling for $ 100 per share.

Details	High Growth	Low Growth	Stagnation	Recession
Probability	0.3	0.4	0.2	0.1
Return on B stock	100	110	120	140
Return on C stock	150	130	90	60

Calculate the expected return and risk on investing $ 1000 in the equity of B Ltd and C Ltd. Comment on the results.

Reference no: EM13348193

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