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 91–100 of 100
  1. 091An airline can hedge its jet fuel only with crude oil futures. With monthly volatilities of 2.6% and 3.0% and a correlation of 0.9, compute the minimum-variance hedge ratio, the share of risk removed and the basis risk that remains.Hedging a bookHardBank market riskQuant risk
  2. 092A fund of funds must drop one of two managers: one returned 14% with 20% volatility and a 32% drawdown, the other 11% with 10% volatility and a 12% drawdown. Compare them on risk-adjusted measures and decide which to keep.Investment and portfolio riskCoreAsset manager risk
  3. 093A bank holds level 1 and level 2A liquid assets against retail and corporate deposits with different 30-day run-off rates. Compute its liquidity coverage ratio and find the cheapest fix if it falls short.Liquidity risk and ALMHardTreasury and ALMRisk GCC
  4. 094An FX desk is long USD 50 million and short EUR 30 million against the rupee. With daily volatilities of 0.35% and 0.5% and a correlation of 0.6, compute the one-day 99% VaR and each position's component VaR, and decide which to reduce.Market risk limits and VaRHardBank market riskTreasury and ALM
  5. 095An expected credit loss model links default rates to GDP growth. A year of GDP falling 7% and a year of 9% growth send its predictions to 9% and 1%, while actual defaults were 4% and 5%. Diagnose the failure and design a management overlay with a governance trail.Model risk and validationCoreModel validationBank credit risk
  6. 096Ransomware takes a lender's systems down for three days. It normally collects Rs 40 crore a day, pays out Rs 35 crore a day and holds Rs 60 crore of cash. Compute the liquidity squeeze and set out the recovery and resilience measures that matter most.Operational risk and loss eventsCoreOperational riskNBFC credit risk
  7. 097A hydro project sells all its power to one state distribution company, which now pays 240 days after billing on Rs 600 crore a year. With Rs 280 crore of annual debt service and a six-month reserve, how much cash is trapped, how long does the reserve last, and what can the lender do?Project and real asset financeCoreProject financeCounterparty risk
  8. 098A microfinance lender has 35% of its Rs 2,000 crore book in one state hit by floods. If portfolio at risk there rises to 20% and half of it is lost, estimate the credit cost and its hit on Rs 400 crore of net worth.Retail and portfolio creditCoreNBFC credit risk
  9. 099A debt fund with Rs 5,000 crore of assets, 15% liquid, faces 30% redemptions in a week and sells illiquid bonds at a 4% discount once cash runs out. Compute the loss borne by the investors who stay, and explain the first-mover problem.Stress testing and scenariosHardAsset manager riskTreasury and ALM
  10. 100A trust holds five equal loans, each with a 10% default probability and no recovery, and its senior tranche is hit only if three or more default. Compute the senior loss probability with independent and with perfectly correlated defaults, and say which tranche gains from correlation.Structured finance and securitisationHardRating agencyQuant risk

Company names and figures are illustrative.