assignments: Financial Risk Management

Volatility Assignment (MS 2017)

Submit the Assignment  here 

Duration Exercises - Home Assignment Submit Here

Interest Rate Risk - Home Assignment Submit Here

Various assignments have been designed for different classes with differing objectives. These assignments aim at testing of and building upon concepts that are covered in the financial risk management classes. The following four assignments are given with different variations from time to time. Please keep visiting the class Notice Board for further instructions.

assignment 1
metallgesseschaft case study

The assignment must have at least 2000 words. Marks will be assigned on the basis of strong arguments and fulfillment of other criteria such as timely submission, avoidance of plagiarism, and originality of your answers. The following four question are be answered.

Q1. Was the marketing strategy of the company successful?

Q2. Was the Stack-and-Roll strategy of the company good enough? What other hedging options the company could have used?

Q3. The board of directors' decision to terminate the long-term forward contracts with customers' was a good or a bad decision? What would you suggest?

Q4. Can derivative contracts be blamed for the losses of the company? Should government restrict the use of derivative contracts? Justify your answer?


This assignment has two parts: 

PART I (4 marks)
Due date = Sep 21, 2015 [MBA 2015]
Due date = Sep 21, 2015 [MSc. Finance]

Note: The assignment has to be submitted to dropbox using the theese links. 

MSc Finance Submit Hedge Ratio Asg. Here

MBA 2015 - Submit Hedge Ratio Asg. Here

You are supposed to: 
1. Collect consecutive six months spot and future share prices data of the assigned companies [Download MSc Finance]. [Download MBA 1.5]

2. Find the hedge ratio between spot and future prices

3. Assume that you have a long position of 3000 shares in the assigned company, then find the number of future contracts (N) to hedge your position

4. Tell whether short-selling or taking a long-position will hedge your existing position

5. Calculate profit or loss right after the six months period (the period which you have used for calculating the hedge ratio)

6. Tell whether your position is fully hedged or not based on the findings in step 5

PART II (4 marks)

Write essays of about 500-1000 words on each of the followings:

1. Highlight different aspects of future contracts on KSE, such as their rules, eligible scripts, settlement process, short-selling, margin requirements, etc.

2. Write an essay on Pakistan Mercantile Exchange Ltd., which commodities are traded on it, how to trade on it, its rules for trading and settlement, who is eligible to trade on it, etc.

3. Suppose a contractor get a project from local government. The contract price is Rs. 5000.0000, that cannot be changed later on. The contractor is required to complete the project in next 2 years. Highlight any price risk that the contractor faces in this contract? How the contractor can hedge this risk?

4. Identify major risk in any 3 industries of Pakistan. How these risk can be hedged? List of industries can be downloaded from here

assignment 3
risk management practices in Pakistani banks

Summarize risk positions (exposures) and risk management practices of the assigned bank in the last 3 years covering the following points. Also, give definitions of the following points from the bank’s annual reports, website, or other documents (using your own wordings).

A. Risk Management Responsibility

a. Risk Responsibilities (who is responsible for creating risk framework and implementation of the same)
b. Risk Management Group Organization


a.   Sovereign Credit Risk
b.   Non-Sovereign Credit Risk
c.   Counter Party Credit Risk on Interbank Limits
d.   Country Risk
e.   Credit Administration
f.    Portfolio Risk Measurement Models
g.   Early Warning System
h.   Management of Non Performing Loans
i.     Portfolio Diversification


a.   Risk Pertaining to Trading Book
      i.    interest Rate Risk - Trading Book
      ii.    Equity Position Risk –
             1.   Equity price risk
             2.   Concentration risk
      iii.    Duration GAP Analysis (having implication for market risk)
b.   Market Risk Capital Charge in each of the three years for the above
c.   Market risk arising from Foreign Exchange Risk


a.   Maturities of Assets and Liabilities


F.   Off-balance exposures:

a.   Letter of credit (all types, their definitions and their implication for risk/exposures/risk management)
b.   Letter of guarantee

assignment 4
volatility & Value at risk calculations


1.       The assignment must be done in MS-Excel and submitted [Msc Finance here and MBA here ] no later than Jan 8, 2017. The email subject should be in this format: Student Names -VOLATILITY ASSIGNMENT, and the file name should in this format  Student - VOLATILITY ASSIGNMENT. IF you do not follow these instructions, you assignment will not be recognized by my email filter and may land anywhere in clutter which my email is full of.

3.       Delayed submission will cost you 0.5 marks per day

4.       All calculations and detailed steps should be shown in the Excel sheets

This assignment involves the application of concepts related to market risk models. You are required to collect daily share prices data of the assigned company for PART-I of the assignment. Minimum number of observations should be 500. Suppose that your bank has invested Rs.500,000 in the firm.



1.       Find volatility with: 

a.        simple standard deviation assuming zero mean

b. Simple standard deviation with normal formula

c.      EWMA

2. Update volatility for 10 days after you have calculated it in the first step.        

3. Calculate VaR of the firm at 95% confidence over 5 days with parametric approach using the measure of volatility as calculated in Req.1

4.       Plot distribution of the returns using Histogram and explain whether the distribution can be called normal?

5.       Calculate VaR of the firm over 5 days with historical simulation method at 5th percentile