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 61–70 of 100
  1. 061Using a one-year rating transition matrix, compute the two-year default probability of a grade B borrower and explain why it is more than twice the one-year figure.Retail and portfolio creditHardBank credit riskQuant risk
  2. 062An insurer holds a Rs 500 crore equity portfolio with a beta of 1.1 against solvency headroom of Rs 150 crore. Apply a 25% market fall, decide whether the headroom survives, and say what else the scenario should include.Stress testing and scenariosWarm upAsset manager risk
  3. 063A securitised personal loan pool yields 14% a year. Investors are paid 8.5%, servicing costs 1% and expected losses are 3%. What is the excess spread, how does it protect investors, and what happens if losses rise to 5%?Structured finance and securitisationWarm upRating agency
  4. 064A bank buys a Rs 5,000 crore loan portfolio for Rs 5,300 crore. It has CET1 of Rs 6,000 crore on RWA of Rs 50,000 crore, the loans carry a 100% risk weight and the premium is goodwill deducted from CET1. What is the CET1 ratio after the deal, and how much capital does it need to stay at 12%?Capital and regulationCoreBank credit riskRating agency
  5. 065A pharma company's loan caps net debt at 3.5 times EBITDA. Net debt is Rs 1,200 crore and EBITDA has fallen from Rs 400 crore to Rs 300 crore after a regulator's warning letter on a plant. Compute the breach and the equity cure, and decide as lender between a waiver, a reset and acceleration.Corporate credit and ratingsCoreBank credit risk
  6. 066A power company that earns only in rupees has a cross-currency swap with your bank in which it pays dollars and receives rupees on USD 100 million, and also owes USD 150 million of loans. The dollar rises 20% against the rupee. Show how your exposure and the client's default risk rise together, and propose limits and mitigants.Counterparty risk and CVAHardCounterparty risk
  7. 067An exporter expected USD 40 million of receipts over six months and hedged only 25% at Rs 84 because its treasurer expected the rupee to weaken. The rupee strengthened to Rs 80. Compute the shortfall, then analyse the failure: the policy, the authority, and what a collar with a Rs 82 floor would have saved.Hedging a bookHardSchrodersNew York · 2021
  8. 068A portfolio has a market beta of 0.9 and a size factor exposure of 0.6. In a month when the market falls 10% and small caps trail large caps by a further 10%, estimate its return, split it by factor, and propose how to cap the size exposure.Investment and portfolio riskCoreAsset manager riskQuant risk
  9. 069A dealer's derivatives carry rating triggers requiring Rs 300 crore of extra collateral on a one-notch downgrade and a further Rs 500 crore on a second notch. It holds Rs 900 crore of unencumbered liquid assets and expects Rs 250 crore of stressed margin outflows. What is the headroom after a two-notch downgrade, and what limits would you set?Liquidity risk and ALMCoreTreasury and ALMCounterparty risk
  10. 070A rates desk has 500 days of P&L with a daily standard deviation of Rs 3.5 crore; its ten worst losses are Rs 21, 17, 15, 12, 11, 10, 9.5, 9, 8.6 and 8.2 crore. Compute 99% VaR by the parametric and historical methods and the 99% expected shortfall, then decide which number the desk should report.Market risk limits and VaRHardUBSZurich · 2021

Company names and figures are illustrative.