MF0016 - TREASURY MANAGEMENT

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(Spring 2013)

Master of Business Administration- Semester 4

MF0016/MA0042 “TREASURY MANAGEMENT”

(4 credits)

(Book ID: B1311)

ASSIGNMENT- Set 1

Marks 60

Note: Each Question carries 10 marks. Answer all the questions.

Q1. Analyse the significance and objectives of asset liability management.(10 Marks) (350-400 words)

Answer : In order to continuously monitor the present and future risks associated with a financial institution’s obligations, it is imperative that a robust ALM framework is in place. It must incorporate the results of new strategies and products, and be able to attach price tags to risks taken - acting as a tool that continually reappraises the cost of risk as new information comes to light.

Q2. What are the features of a capital market?(10 Marks) (350-400 words)

Answer : A capital market can be defined narrowly as the market for investors to trade securities, and widely as the market for companies and governments to raise money or capital. An efficient capital market is one where prices change rapidly in response to changes in demand and supply, thus producing "fair" prices at any time. As well as information, an efficient capital market will usually require liquidity through a

Q3. Describe the approaches of CAC.(10 Marks) (350-400 words)

Answer : Command and control instruments (CAC)

"Command and control" regulations focus on preventing environmental problems by specifying how a company will manage a pollution-generating process. This approach generally relies on detailed regulations followed up by an ongoing inspection program. In the United States, the Resource Conservation and Recovery Act (RCRA) is a prime example of this kind of regulation.

Q4. Explain the IRR hedging techniques.(10 Marks) (350-400 words)

Answer : You have now learned how fixed-income securities are valued, given the yield curve. The value of the security is the present value of the future cash flows from the security. Each cash flow is discounted using the interest rate for the appropriate maturity, with these rates given by the yield curve.

Q5. Define Vary and illustrate its components (10 Marks) (350-400 words)

Answer : The Value at Risk (Vary) approach to risk management aims to consolidate in a consistent way, at the organization or entity level, the risks inherent in a portfolio of various classes of financial instruments.  The results are expressed as a single number -- the Vary --  in terms of the of maximum expected loss, the confidence interval of the

Q6. What are the functions and benefits of integrated treasury ? (10 marks) (350-400 words)

Answer : Historically, tax and treasury operations have kept their distance, owing partly to the fact that the two groups typically do not see the world through the same set of eyes. When faced with an acquisition, for example, tax implications and related compliance issues are far down the list of top treasury concerns. Liquidity management, funding and other bottom-line issues are typically more central.

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