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 1–7 of 7 · 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. 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
  3. 029A company hedged forecast dollar imports with forwards, but the imports came in well below forecast and the rupee strengthened. What did the excess cover cost, and why is it a speculative position?Hedging a bookCoreOperational riskBank market risk
  4. 042An asset manager wants to hedge a high-beta equity portfolio with index futures. Size the hedge, then show what happens when the index falls 8% and the portfolio falls 12%.Hedging a bookWarm upAsset manager risk
  5. 054An infrastructure company has Rs 1,000 crore of floating rate loans and EBITDA of Rs 180 crore. A swap would fix its benchmark at 7.2% when the benchmark is 7%. Compare interest cost and cover, hedged and unhedged, if rates fall to 5% or rise to 9%.Hedging a bookCoreBank credit riskTreasury and ALM
  6. 079A sugar mill has sold 60% of its output forward, and the spot price then falls 20%. Compute revenue with and without the hedge, and explain what the lender gains from the hedging policy.Hedging a bookWarm upBank credit riskNBFC credit risk
  7. 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

Company names and figures are illustrative.