Finance Accounting and Bank Risk Management
1. The Task
You are required to write an essay (in this case a report) that consists of Value-at-Risk (VaR) or the expected shortfall (EH) calculations using real financial data and do critical analysis given the results.
To do this, you need to search and download two financial data over 3-year time windows. The data can be share or stock prices, foreign exchange rates, interest rates, or commodity prices. You only need two set of financial data in daily frequency.
You are required to:
(1) Compute
– single VaR and EH, [5 marks]
– portfolio VaR and EH using variance-covariance approach. [10 marks]
(2) Using historical simulation approach, compute
– single VaR and EH, [7.5 marks]
– portfolio VaR and EH. [7.5 marks]
(3) Interpret and critically discuss the sources of risk exposure given your selected dataset using the results you get from (1) and (2).
(4) Suggest hedging strategies based on your results. [30 marks for (3) and (4)]
You may want to consider the following:
• weights for each data you use in a portfolio.
• confidence level, i.e. 95% and 99%.
• comparison between each model or approach.
• trading position assumptions.
• the strengths and weaknesses of each method.
2. The Requirement
You also need to write a report to communicate the findings from your analysis. The report should describe the purposes and results of your work. A well-written report should demonstrate your ability in the following components:
(a) Methods: You need to explain procedures you use in the modelling process. The explanations should include on how to collect, evaluate and analyse relevant information to support your calculations. A good discussion and critical evaluation should be provided, along with citation of relevant sources. (10 marks)
(b) Findings and Discussions: You should make appropriate arguments supported by the findings and evidences. Your discussions should be based on relevant theories and include the following components:
– Evaluation of data, computation, and results
– Critical reasoning
– Logical structure of discussion
– Quality of discussions (60 marks)
(c) Conclusions and Recommendations: Recommendations should be adequate in terms of scope and underpinned by the analysis. The recommendations should reflect an understanding of the report. Strengths and limitations of the assessed recommendations made with due consideration of the context. (10 marks)
(d) Presentation, spelling, word length, and communication: The materials should be presented in a coherent and logical manner supported with relevant diagrams and/or tables.(10 marks)
(e) Referencing: Follows the Harvard style. The sources should properly cited and acknowledged within the text. (10 marks)
The Structure of the Report
Title Page
This includes:
• The title
• Your name
• The date
Terms of Reference
Under this heading you could include a brief explanation of who will read the report (audience), and why it was written (purpose). Given that this is an academic piece of work the terms of reference will include: “A report submitted in fulfilment of the requirements for the Bank Risk Management module (MMN330194 ? Glasgow/London1 ), Department of Finance, Accounting and Risk, Glasgow Caledonian University”, in addition to other elements listed above.
Executive Summary
The summary should briefly describe the content of the report. This covers the following:
• The aims of the report
• The empirical findings
• Practical or managerial implications
Note: The summary should provide the reader with a clear and helpful overview of the content of the report.
Table of Contents
The contents page should list the different headings together with the page numbers. This should be presented in such a way that the reader can quickly scan the list of headings and locate a particular part of the report. You can use whatever numbering system you choose.
Introduction
This should include all the relevant components of an introduction including: The aims and objectives, any necessary background history, amongst others.
Methods
This should include explanations of procedures followed and relevant information on the modelling or calculation process and the rationale of choosing financial data, amongst others. You also need to cite relevant sources that you use. Keep in mind that you are writing to an uninformed audience.
Results and Discussions
This section should include a summary of the results of the VaR and EH together with any necessary diagrams, graphs or tables of data that support your results. This should be presented in a logical order using relevant academic and non-academic sources to support your discussions. You may also use appendix to show more graphs or tables.
Discussions: The main body of the report is where you discuss your material. The facts and evidences you have gathered from your literature review should be analysed and discussed with specific reference to the problem or issue. If this section is lengthy you might divide it into section headings.
Conclusions and Recommendations
In the conclusion and recommendation section, you should show the overall significance of what has been covered. You need to reiterate the most critical points in the report and make recommendations based on your analysis. You can choose to highlight what you consider the most central findings from your report and the possible limitations of the analyses.
Are you struggling to keep up with the demands of your academic journey? Don't worry, we've got your back! Exam Question Bank is your trusted partner in achieving academic excellence for all kind of technical and non-technical subjects. Our comprehensive range of academic services is designed to cater to students at every level. Whether you're a high school student, a college undergraduate, or pursuing advanced studies, we have the expertise and resources to support you.
To connect with expert and ask your query click here Exam Question Bank
