Risk Management case studies, worked step by step

Cases
100
Traced to a firm
19
Topics
13
Hard
30
Topic
All topicsCapital and regulation8Corporate credit and ratings10Counterparty risk and CVA7Hedging a book8Investment and portfolio risk8Liquidity risk and ALM8Market risk limits and VaR7Model risk and validation8Operational risk and loss events8Project and real asset finance7Retail and portfolio credit8Stress testing and scenarios7Structured finance and securitisation6
Level
AnyWarm upCoreHard
Source
AnyReported at a firmStandard
Showing 1–10 of 21 · filtered from 100Clear filters
  1. 004A home finance company hedged its fixed-rate mortgage book with payer swaps of matching DV01. Rates then fall 150 basis points and prepayments surge. Why does the hedge lose money, and how much?Hedging a bookHardTreasury and ALMBank market risk
  2. 015A holding company with no operations services its debt from dividends paid by a cement subsidiary and a power subsidiary, and the power subsidiary's loans block dividends above 4 times leverage. How safe is the holding company's debt?Corporate credit and ratingsHardRating agencyBank credit risk
  3. 017A bank has sold one-year index puts to a client and delta-hedged them. The index falls 5% and the put delta moves from minus 0.35 to minus 0.48. What hedge trade does the desk make, what does the move cost, and why does this hedge bleed in falling markets?Hedging a bookHardBank market riskCounterparty risk
  4. 020A bank has a Rs 100 crore firm-wide VaR budget across rates, credit and equities desks whose standalone VaRs add to Rs 120 crore. Compute the diversified VaR and allocate the budget by component VaR.Market risk limits and VaRHardBank market riskRisk GCC
  5. 041A bank is quoting a five-year cross-currency swap to a steel company. Given the expected exposure profile, default probability and recovery, compute the CVA and decide whether a 15 basis point upfront credit charge covers it.Counterparty risk and CVAHardCounterparty riskQuant risk
  6. 044A bank with concentrated uninsured deposits and underwater held-to-maturity bonds faces a social-media-driven run. Compute the funding hole, the loss realised selling bonds to fill it, and what the bank should have measured beforehand.Liquidity risk and ALMHardTreasury and ALMBank market risk
  7. 045A bank's fraud model flags 2% of transactions and catches 70% of fraud; a challenger flags half as many and catches 60%. Given the cost of a missed fraud and of reviewing an alert, which model should the bank run?Model risk and validationHardModel validationOperational risk
  8. 047A toll road with a 15-year concession is sized for debt at 1.3 times cover on its base case. How much can it borrow, and what happens to cover if traffic comes in 15% below the forecast?Project and real asset financeHardProject financeBank credit risk
  9. 048A bank is pricing an unsecured personal loan with a 4% default probability and 70% loss given default. Build the minimum rate from its costs, including capital, and judge a proposal to undercut a competitor's 13% offer.Retail and portfolio creditHardBank credit riskRisk GCC
  10. 049Run a one-year recession scenario on a bank's corporate and retail books. Compute stressed credit losses and the post-stress CET1 ratio, and say what the static result hides.Stress testing and scenariosHardBank credit riskRisk GCC

Company names and figures are illustrative.