- Bbf315 03 Risk Management May 2022 Assignment 2 Question 1 A Explain The Three 3 Advantages Of Options Over Forwards 1 (196.71 KiB) Viewed 9 times
BBF315/03 Risk Management May 2022 Assignment 2 Question 1 (a) Explain the THREE (3) advantages of options over forwards and futures. (b) As a financial consultant, recommend to your corporate customer of internal hedging strategies through leading and lagging. Prove your recommendation with example. (13 marks) Question 2 Illustrate the FIVE (5) primary methods of managing credit risk for derivatives dealers. (25 marks) Question 3 You are given the following information of two assets: A RM30 million 15% 10% Asset Value of investment Expected return Standard deviation (12 marks) B RM20 million 12% 8% Correlation coefficient between returns on asset A and B is 0.3. Assume 252-days trading a year. (a) You have been asked to compute: (i) portfolio expected return (ii) portfolio standard deviation (iii) one-day and ten-day value at Risk (VaR) (b) Interpret the result of part (a) above. (6 marks) (6 marks) (10 marks) (3 marks)