FIN343 - Market Risk Management - The Collateralised Debt Obligation (CDO) - the Global Financial Crisis (GFC) - Accounting And Finance Assignment Help

Assignment Task:

Question 1
LO1: Explain the concept and types of market risk.
(a)Define market risk. 
(b)List four (4) different kinds of market prices to which a financial institution could be exposed to. 

Question 2
LO6: Evaluate key market risks in a range of different scenarios.
(a)What does it mean for an asset to be illiquid? 
(b)List two (2) examples of illiquid assets and describe why each would be considered illiquid.

Question 3    
LO4: Appraise value at risk and how it is used in the measurement of market risk in a range of different scenarios.
(a)Why is Value-at-Risk (VaR) such a controversial measure of risk? Discuss the drawbacks of VaR as a risk measure. Would you recommend the use of VaR as a risk measure for your firm? Why?/Why not?

Section B 

Question 1    
LO3: Understand the process of stress testing and associated model risk.You have just been appointed as the Senior Risk Officer (Market Risk) at a major financial institution. Your Board has requested a short briefing note (no more than 750 words) on the lessons from the failure of long-term capital management and accompanying practical examples of how financial institutions around the world have changed their practices in the wake of the disaster.

Question 2    
LO3: Evaluate how market risk is identified, measured and mitigated.
(a)Why is the solution to moral hazard for financial institutions an ongoing struggle between proper incentives and proper controls? 
(b)What are some approaches to achieving an appropriate balance between incentives and controls? Provide two (2) examples from industry to support your answer. 

Question 3    
LO2: Understand the lessons from major financial disasters (including the GFC).
Select one of the six major institutional roles in the Collateralised Debt Obligation (CDO) process at the heart of the Global Financial Crisis (GFC), specifically: subprime mortgage originators; CDO creators; ratings agencies; investors; investment banks; and insurers.
(a)Critically assess one of these institutional roles during the GFC (with specific reference to CDOs of subprime mortgages). 
(b)Outline the lessons from the GFC that can inform current practice within that institutional role. 
(c)Outline the lessons from the GFC for regulators of that particular institutional role. 

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