Ch 12 Value at Risk and Expected Shortfall
Chapters 8 and 9 describe how a trader, responsible for a financial
institutions exposure to a particular market variable (e.g. an
equity index, an interest rate or a commodity price), quantifies
and manages risk
Ch 10 Volatility
It is important for a financial institution to monitor the volatilities
of market variables (such as interest rates, exchange rates,
equity prices and commodity prices) on which the value of its
portfolio depends.
The chapter starts by e
Ch 9 Interest Rate Risk
Interest rate risk is more difficult to manage than the risk arising
from market variables such as equity prices, exchange rates and
commodity prices.
One complication is that there are many different interest rates in
any given cu
Ch 8 How Traders Manage Their Risks
The trading function within a financial institution is the front
office;
the part of the financial institution concerned with the total risk,
capital adequacy and regulatory compliance is the middle office;
the record k
8, 9)
10)
Interest rate mismatch = 30 5 = $25billion
If interest rate increases x%, interest income decreases by x%*$25billion
(Net interest income*0.7)/2 = -0.12
Net interest income = -$0.343 billion
0.343 = x * 25
x = 0.0137
Increase in interest rate of
Assignment 2 (for Ch 5-10, 12)
Question 1
The current price of a stock is $94, and 3-month European call
options with an exercise price of $95 currently sell at $4.70. An
investor who feels that the price of the stock will increase is trying
to decide bet
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2016
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L. C. Templeton, S. Philips
2007
Peter Lynch & John Rothchild
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2005
Charles R. Darwin
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Reading and life satisfaction
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