Dear
students get fully solved assignments
Send
your semester & Specialization name to our mail id :
help.mbaassignments@gmail.com
or
call
us at : 08263069601
ASSIGNMENT
Course Code
: MS-494
Course Title
: Risk
Management in Banks
Assignment Code
:
MS-494/SEM-I/2014
Coverage
: All Blocks
Note : Attempt all the questions and submit this assignment on or
before 30th April, 2014 to the coordinator of your study center.
Q. 1. Discuss the
framework of Basel Accord – I and II and explain the changes proposed in the
Basel Accord – II for the Basel Accord – III.
Answer:Basel I is the round of deliberations by central bankers
from around the world, and in 1988, the Basel Committee on Banking Supervision
(BCBS) in Basel, Switzerland, published a set of minimum capital requirements
for banks. This is also known as the 1988 Basel Accord, and was enforced by law
in the Group of Ten (G-10) countries in 1992. A new set of rules known as Basel
II was later developed with the intent to supersede the Basel I accords.
However they were criticized by some for allowing banks to take on additional
types of risk, which was considered part of the cause of the US subprime
financial crisis that started in 2008. In fact, bank regulators in the United
States took the position of requiring a bank to follow the set of rules (Basel
I or Basel II) giving the more conservative approach for the bank. Because of
this it was anticipated that only the few very largest US Banks would operate
under the Basel II rules, the others being regulated under the Basel I
framework. Basel III was developed in response to the
Q. 2. What is ‘Credit
Risk Derivative’? Explain the various types of Credit Derivatives and discuss
their special features.
Answer:In finance, a credit derivative refers to any one of
"various instruments and techniques designed to separate and then transfer
the credit risk"[1] or the risk of an event of default of a corporate or
sovereign borrower, transferring it to an entity other than the lender[2][3] or
debtholder.
An unfunded credit derivative is
one where credit protection is bought and sold between bilateral counterparties
without the protection seller having to put up money upfront or at any given
time during the life of the deal unless an event of
Q. 3. What do you mean by ‘Market Risk’?
Discuss the factors that contribute to this risk. How is market risk managed?
Answer:Market risk is the risk that the value of an investment will
decrease due to moves in market factors.
Volatility frequently refers to
the standard deviation of the change in value of a financial instrument with a
specific time horizon. It is often used to quantify the risk of the instrument
over that time period. Volatility is typically expressed in annualized terms,
and it may either be an absolute number ($5) or a fraction of the initial value
(5%).
Q. 4. Explain the
concept of ‘Internet Rate Risk’ and discuss the reasons for a Bank to use
Internet Rate Futures.
Answer: Interest rate risk affects the value of bonds more directly
than stocks, and it is a major risk to all bondholders. As interest rates rise,
bond prices fall and vice versa. The rationale is that as interest rates
increase, the opportunity cost of holding a bond decreases since investors are
able to realize greater yields by switching to other investments that reflect
the higher interest rate. For example, a 5% bond is worth more if interest
rates decrease since the bondholder receives a fixed rate of return relative to
the market, which is offering a lower rate of return as a result of the
decrease in rates.
Q. 5. Discuss the need
for effective operational risk management and explain the process of
operational risk management in Banks.
Answer:Operational risk is "the risk of a change in value
caused by the fact that actual losses, incurred for inadequate or failed
internal processes, people and systems, or from external events (including
legal risk), differ from the expected losses". This definition from the
Basel II regulations was also adopted by the European union Solvency II
Directive.". In October 2014, the Basel Committee on Banking Supervision
proposed a revision to its operational risk capital framework that sets out a
new standardized approach to replace the basic indicator
Dear
students get fully solved assignments
Send
your semester & Specialization name to our mail id :
help.mbaassignments@gmail.com
or
call
us at : 08263069601