Intoduction to Frm

In: Business and Management

Submitted By mvdian
Words 3005
Pages 13
Module 1 Introduction to financial risk management (FRM)

Financial Risk Management
Module 1 Introduction to financial risk management
Question 1
In 2009 which organisation posted the biggest corporate loss in US history and in the same month announced staff bonuses in excess of USD 450 million?

American International Group (AIG).
Lehman Brothers.
General Motors.
Merrill Lynch.

Question 2
The Gig, an Australian heavy metal band, has decided to let its fans invest in the music industry and guaranteed that for every $100 invested in The Gig Music Fund they will get a monthly dividend of $12.00.
After six months $20 million has been invested and the depositors have all received $12.00 a month.
A spokesman announced that the band needs to raise an additional $5 million to fund a new album and offers music lovers $15 per month for every new $100 invested.
Your parents are aware you are completing a financial risk management course and ask your advice as to whether or not to invest.
You respond:

The Gig has a proven track record of paying dividends so go ahead with the investment.
The new album is a guaranteed success, so there is little risk involved.
This appears to be a Ponzi scheme so reject the offer.
Everyone so far has made money and hundreds of people have already done their research, so it is a quality investment.

Question 3
The board of South Soap Ltd, an Australian soap manufacturer exporting throughout the Pacific, has decided to appoint a treasurer to manage its $100 million per annum foreign exchange exposure.
When setting the performance measure, the board rationale was:
As we have never had a treasurer before, we will benchmark the treasurer’s performance against our current policy of doing nothing— which we believe is risk-neutral.

Semester 1, 2012

Page 1

Module 1 Introduction…...

Similar Documents

Intoduction of Xml

...XML, or extensible Markup Language, is a language based on web standards use by various communities and products. Similar to HyperText Markup Language, or HTML, XML is more concerned with data display than the presentation (Robbins, 2006). XML provides a unique structure that enables developers to define their own tags and attributes for elements. Defining such a unique set tags gives their intended audience data in a specific information format. Identifying difference of XML and HTML, examining XML standards, and providing XML examples will explain why XML is an important data exchange markup language standard. In order to understand XML it is important to understand HTML and differences between the two languages. The core technology for web page design is HTML. This language provides a non-programming language that marks up a page through use of tags to present objects. Angle bracket with keywords inside in an open and closing format provides instructions for a browser to interpret to display objects. Not all objects of HTML actually have open and close tags. Examples of standard HTML tags include “ ”, “” objects which produce a link and text input. Attributes are associated with objects allow displaying variations to the rendered objects. A browser is used to generate a page based on the objects that are displayed in order. Presentation of content employs a static method. Constant updates to pages are an inherent setback for using HTML. Additional......

Words: 1280 - Pages: 6


...2005 11:11 Dec 10, 2007 Jkt 036932 PO 00000 Frm 00001 Fmt 5229 Sfmt 5229 E:\HR\OC\36932.XXX 36932 E:\seals\congress.#15 House Doc. 110–50 The printing of the revised version of The Constitution of the United States of America As Amended (Document Size) is hereby ordered pursuant to H. Con. Res. 190 as passed on July 25, 2007, 110th Congress, 1st Session. This document was compiled at the direction of Chairman Robert A. Brady of the Joint Committee on Printing, and printed by the U.S. Government Printing Office. cprice-sewell on PROD1PC72 with HEARING (ii) VerDate Aug 31 2005 11:19 Dec 10, 2007 Jkt 036932 PO 00000 Frm 00002 Fmt 7601 Sfmt 7601 E:\HR\OC\932.CC 932 CONTENTS Historical Note ......................................................................................................... Text of the Constitution .......................................................................................... Amendments ............................................................................................................ Proposed Amendments Not Ratified ...................................................................... Index to the Constitution and Amendments ......................................................... v 1 13 29 33 cprice-sewell on PROD1PC72 with HEARING (III) VerDate Aug 31 2005 11:19 Dec 10, 2007 Jkt 036932 PO 00000 Frm 00003 Fmt 5904 Sfmt......

Words: 42833 - Pages: 172

Cpa Frm

...Financial Risk Management – Frequently Asked Questions Module 1 – Introduction to Financial Risk Management 1. What are the major categories of risk? Please provide examples. (Topic heading: Main categories of risk controls) Seven categories of risk are outlined. These are summarised in the table below: Type of risk Liquidity Definition The risk of not being able to pay back what you owe due to the inability to convert assets into cash quickly, without materially moving the price. Example Holding long-term property investments that cannot be converted into cash quickly to pay obligations as they fall due. Funding The risk of funding support not being met by investors or bankers. An existing financier (e.g. bank) withdraws its funding commitment as a result of poor performance by the entity. Interest rate The risk of a change in interest rates impacting borrowing costs, interest income and/or asset/debt values. Central bank increases the cash rate and your company has a floating rate loan pegged to the cash rate. Foreign exchange The risk of the foreign exchange rate fluctuating, impacting the currency conversion of revenues, expenses, assets and/or liabilities. Includes transaction, translation, competitive/economic and accounting exposures. If the AUD falls, an Australian importer of clothing from the US pays more AUD for the same amount of clothing. Commodity price The risk of the change in price of a commodity, whether used......

Words: 7954 - Pages: 32


...Introduction Facebook, My, Space, LinkedIn, Friendster, Cloudworks, Twitter are but a few examples of the relatively new phenomenon of online social networking. People of all ages are flocking to the internet and are signing up for social networking sites by the millions. Facebook, the examples, boasted 901 million monthly active users and more than 125 billion friend connections at the end of March (Key Facts 2012). This popularity of online social networking sites (SNSs) is constantly growing. Educators are set to take advantage of the multiple collaboration tools and discussion opportunities provided by social networking sites for secondary and higher education ( Hoffman, 2009:Mason & Rennie 2008, as cited in Forkosh-Baruch & Hershkowitz, 2012). Despite the fact that there is limited guidance on how educators can intergrate social networking sites into subject which have been traditionally delivered face-to-face (Andrew & Drennan, 2009), teachers are on the lookout for information on the potential benefits or harmful effects using SNSs as a new and innovative way to try to engage students and improve students achievement. Being in a worlds where the use of modern technology is rampant, most students habitually use the internet and its social networking sites. As students, they have the responsibilities to study. But there are always distractions that may affect how the study – one of these distractions is the addiction to social networking sites. This......

Words: 275 - Pages: 2

An Examination of Discrimination Against Transgender Americans in the Workplace Hearing

...HEALTH, EMPLOYMENT, LABOR AND PENSIONS COMMITTEE ON EDUCATION AND LABOR U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED TENTH CONGRESS SECOND SESSION HEARING HELD IN WASHINGTON, DC, JUNE 26, 2008 Serial No. 110–99 Printed for the use of the Committee on Education and Labor ( Available on the Internet: U.S. GOVERNMENT PRINTING OFFICE 43–027 PDF WASHINGTON : 2008 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate 0ct 09 2002 10:55 Dec 17, 2008 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 G:\DOCS\110TH\HELP\110-99\43027.TXT HBUD PsN: DICK COMMITTEE ON EDUCATION AND LABOR GEORGE MILLER, California, Chairman Dale E. Kildee, Michigan, Vice Chairman Donald M. Payne, New Jersey Robert E. Andrews, New Jersey Robert C. ‘‘Bobby’’ Scott, Virginia Lynn C. Woolsey, California ´ Ruben Hinojosa, Texas Carolyn McCarthy, New York John F. Tierney, Massachusetts Dennis J. Kucinich, Ohio David Wu, Oregon Rush D. Holt, New Jersey Susan A. Davis, California Danny K. Davis, Illinois ´ Raul M. Grijalva, Arizona Timothy H. Bishop, New York ´ Linda T. Sanchez, California John P. Sarbanes, Maryland Joe Sestak, Pennsylvania David Loebsack, Iowa Mazie Hirono, Hawaii Jason Altmire, Pennsylvania John......

Words: 49958 - Pages: 200


...regulatory authorities. TITLE III—CORPORATE RESPONSIBILITY Public company audit committees. Corporate responsibility for financial reports. Improper influence on conduct of audits. Forfeiture of certain bonuses and profits. Officer and director bars and penalties. Insider trades during pension fund blackout periods. Rules of professional responsibility for attorneys. Fair funds for investors. Act of 2002. Corporate responsibility. 15 USC 7201 note. TITLE IV—ENHANCED FINANCIAL DISCLOSURES Sec. 401. Disclosures in periodic reports. Sec. 402. Enhanced conflict of interest provisions. Sec. 403. Disclosures of transactions involving management and principal stockholders. VerDate 11-MAY-2000 09:34 Sep 09, 2004 Jkt 019194 PO 00000 Frm 00001 Fmt 6580 Sfmt 6582 O:\TURNEY\PUBL204.116 APPS10 PsN: PUBL204 116 STAT. 746 Sec. Sec. Sec. Sec. Sec. Sec. 404. 405. 406. 407. 408. 409. PUBLIC LAW 107–204—JULY 30, 2002 Management assessment of internal controls. Exemption. Code of ethics for senior financial officers. Disclosure of audit committee financial expert. Enhanced review of periodic disclosures by issuers. Real time issuer disclosures. TITLE V—ANALYST CONFLICTS OF INTEREST Sec. 501. Treatment of securities analysts by registered securities associations and national securities exchanges. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. Sec. 601. 602. 603. 604. 701. 702. 703. 704. 705. TITLE VI—COMMISSION RESOURCES AND......

Words: 32510 - Pages: 131

Convexity & Duration curve of prices for Ginnie Maes in June 2001 is as follows: 6% at 92. 7% at 94. and 8% at 96.5. What is the estimated convexity of the 7s? a) 53 b)26 c) 13 d) -53 Example 1-10: FRM Exam 2001-Question 71 Calculate the modified duration of a bond with a Macauley duration of 13.083 years. Assume market interest rates are 11.5% and the coupon on the bond is paid semiannually. a) 13.083 b) 12.732 c) 12.459 d) 12.371 Example I-II: FRl\'1 Exam 2002-Question 118 A Treasury bond has a coupon rate of 6% per annum (the coupons are paid semiannually) and a semiannually compounded yield of 4% per annum. The bond matures in 18 months and the next coupon will be paid 6 months from now. Which number is closest to the bond's Macaulay duration? a) 1.023 years b) 1.457 years c) 1.500 years d) 2.915 years Example 1-12: FRM Exam 1998-Question 29 A and B are two perpetual bonds; that is. their maturities are infinite. A has a coupon of 4% and B has a coupon of 8%. Assuming that both are trading at the same yield. what can be said about the duration of these bonds? a) The duration of A is greater than the duration of B. b) The duration of A is less than the duration of B. c) A and B have the same duration. d) None of the above. Example 1-13: FRM Exam 1997-Question 24 Which of the following is not a property of bond duration? a) For zero-coupon bonds. Macaulay duration of the bond equals its years to maturity. b) Duration is......

Words: 1001 - Pages: 5


...General business loan program. Assistance to active duty military reservists. Microloan program. Defense Economic Transition Loan Program. State development company program. TITLE V—PROCUREMENT ASSISTANCE Sec. 501. Subcontracting. Sec. 502. Participation in Federal procurement. Sec. Sec. Sec. Sec. 601. 602. 603. 604. TITLE VI—REPORTS AND DATA COLLECTION Reporting requirements. Report on small business and competition. Annual report of the Administrator. Data and information collection. TITLE VII—MISCELLANEOUS PROVISIONS Sec. 701. Administrator’s order. Sec. 702. Small Business Administration Office of Advocacy. Sec. 703. Study of fixed-asset small business loans. VerDate 26-APR-99 10:02 Sep 03, 1999 Jkt 069139 PO 00050 Frm 00001 Fmt 6580 Sfmt 6581 G:\PUBLAW\PUBL050.106 apps13 PsN: apps13 113 STAT. 234 PUBLIC LAW 106–50—AUG. 17, 1999 TITLE I—GENERAL PROVISIONS 15 USC 657b note. SEC. 101. FINDINGS. Congress finds the following: (1) Veterans of the United States Armed Forces have been and continue to be vital to the small business enterprises of the United States. (2) In serving the United States, veterans often faced great risks to preserve the American dream of freedom and prosperity. (3) The United States has done too little to assist veterans, particularly service-disabled veterans, in playing a greater role in the economy of the United States by forming and expanding small business enterprises. (4) Medical advances and new......

Words: 8652 - Pages: 35


...2008 FRM® Examination  Study Guide  Topic Outline, Readings, Test Weightings    The Study Guide sets forth primary topics and subtopics under the five risk‐related disciplines covered in the FRM exam.  The  topics  were  selected  by  the  FRM  Committee  as  topics  that  risk  managers  who  work  in  practice  today  have  to  master. The topics are reviewed yearly to ensure the FRM exam is kept timely and relevant.    FRM Examination Approach  The FRM exam is a practice‐oriented examination. Its questions are derived from a combination of theory, as set forth in  the readings, and “real‐world” work experience. Candidates are expected to understand risk management concepts and  approaches and how they would apply to a risk manager’s day‐to‐day activities.  The FRM examination is also a comprehensive examination, testing a risk professional on a number of risk management  concepts and approaches. It is very rare that a risk manager will be faced with an issue that can immediately be slotted  into one category. In the real world, a risk manager must be able to identify any number of risk‐related issues and be  able to deal with them effectively.    Readings  Questions for the FRM examination are derived from the readings listed under each topic outline.  These readings were  selected by the FRM Committee to assist candidates in their review of the subjects covered by the exam. It is strongly ......

Words: 2523 - Pages: 11

2009 Authorization Act

...United States Government, the Community Management Account, and the Central Intelligence Agency Retirement and Disability System, and for other purposes. 1 Be it enacted by the Senate and House of Representa- 2 tives of the United States of America in Congress assembled, 3 4 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. (a) SHORT TITLE.—This Act may be cited as the 5 ‘‘Intelligence Authorization Act for Fiscal Year 2009’’. 6 (b) TABLE OF CONTENTS.—The table of contents for hsrobinson on PROD1PC76 with BILLS 7 this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. Definitions. TITLE I—BUDGET AND PERSONNEL AUTHORIZATIONS VerDate Aug 31 2005 21:15 Jul 18, 2008 Jkt 069200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\H5959.PCS H5959 2 Sec. Sec. Sec. Sec. Sec. Sec. 101. 102. 103. 104. 105. 106. Authorization of appropriations. Classified Schedule of Authorizations. Personnel ceiling adjustments. Intelligence Community Management Account. Limitation on the use of covert action funds. Prohibition on use of funds to implement ‘‘5 and out’’ program of the Federal Bureau of Investigation. TITLE II—CENTRAL INTELLIGENCE AGENCY RETIREMENT AND DISABILITY SYSTEM Sec. 201. Authorization of appropriations. Sec. 202. Technical modification to mandatory retirement provision of the Central Intelligence Agency Retirement Act. TITLE III—GENERAL INTELLIGENCE COMMUNITY MATTERS Subtitle......

Words: 24825 - Pages: 100

Frm Assignment

...Financial Risk Management (1 Sem, 2015-2016) Assignment 1 1. Suppose that each of two investments has a 4% chance of a loss of $10 million, a 2% chance of a loss of $1 million, and a 94% chance of a profit of $1 million. They are independent of each other. (a) What is the VaR for one of the investments when the confidence level is 95%? (b) What is the expected shortfall when the confidence level is 95%? (c) What is the VaR for a portfolio consisting of the two investments when the confidence level is 95%? (d) What is the expected shortfall for a portfolio consisting of the two investments when the confidence level is 95%? (e) Show that, in this example, VaR does not satisfy the subadditivity condition whereas expected shortfall does. 2. Suppose that daily changes for a portfolio have first-order correlation with correlation parameter 0.12. The 10-day VaR, calculated by multiplying the one-day VaR by, is $2 million. What is a better estimate of the VaR that takes account of autocorrelation? 3. Suppose that the portfolio considered in Section 13.1 has (in $000s) 3,000 in DJIA, 3,000 in FTSE, 1,000 in CAC 40, and 3,000 in Nikkei 225. Use the spreadsheet on iSpace to calculate what difference this makes to (a) The one-day 99% VaR and ES that are calculated in Section 13.1. (b) The one-day 99% VaR and ES that are calculated using the weighting-of observations procedure in Section 13.3 and=0.995 (c) The one-day 99% VaR and ES that are calculated using......

Words: 367 - Pages: 2

Frm Study Guide

...2016 FRM Exam Study Guide ® The designation recognized by risk management professionals worldwide 2016 Financial Risk Manager (FRM®) Exam Study Guide TOPIC OUTLINE, READINGS, able to deal with them effectively. As TEST WEIGHTINGS such, the Exams are comprehensive in The Study Guide sets forth primary nature, testing a candidate on a number topics and subtopics covered in the FRM of risk management concepts and Exam Part I and Part II. The topics were approaches. selected by the FRM Committee as ones that risk managers who work in practice today have to master. The topics and READINGS Questions for the FRM Exams are related their respective weightings are reviewed to and supported by the readings listed yearly to ensure the Exams are timely under each topic outline. These readings and relevant. The study Guide also were selected by the FRM Committee contains a full listing of all the readings to assist candidates in their review of that are recommended as preparation the subjects covered by the Exams. It is for the FRM Exam Part I and Part II. strongly suggested that candidates review Key concepts (knowledge points) these readings in depth prior to sitting for appear as bullet points at the beginning each exam. All of the readings listed in the of each section and are intended to help FRM Study guide are available through candidates identify the major themes GARP.......

Words: 4160 - Pages: 17

Behavioral Finance

... Address correspondence to Masaki Mori, Graduate School of International Management, International University of Japan, 777 Kokusai-cho, Minami Uonuma-shi, Niigata, 949-7277 Japan. E-mail: Mortgages can be classified into two broad categories: fixed rate mortgages (FRMs) and adjustable rate mortgages (ARMs). A FRM specifies an interest rate that stays fixed for the life of the mortgage (typically 15 or 30 years), regardless of market conditions. An ARM is a mortgage in which the interest rate is tied to an index (i.e., the market interest rate) and is periodically—usually annually—adjusted as the rate index moves up or down. ARMs were first introduced in the United States during the 1980s, and a considerable number of U.S. borrowers still choose them over FRMs, even when interest rates are historically low. As an example, during 2004 and 2005 when interest rates were at 30-year lows, ARMs accounted for approximately a third of all mortgage originations in the United States. By contrast, Germany has one of the lowest shares of ARMs among European countries. In Germany, variable- or adjustable-rate mortgages account for only 10% of mortgage originations. The choice between ARMs and FRMs only recently became available for Japanese borrowers. Until October 2003, very few longterm fixed-rate mortgages were available in Japan. Then a new mortgage loan product, called a FLAT35, was introduced to the Japanese market. FLAT35 is the first long-term FACTORS IN MORTGAGE......

Words: 7970 - Pages: 32


...INRODUCTION Many incoming students face these factors that might affect in choosing Hotel and Restaurant Management course from other courses available. Some students choose HRM course because they think that it is easy and a fast way to graduate because some of the mindset of the students are just to graduate and get a job like being a waiter or bartender, without thinking that the knowledge that they learned wasn’t put into good use. On the recent enrollment on Trinity University of Asia, students of Hotel and Restaurant Management course gradually increased, this shows that many students are giving interest in the course and because of that, the course is now being recognized as one of the top courses to be taken in the Philippines. One of the benefits of choosing the course is that you can learn about knowing the right managerial skills in handling a Hotel and Restaurant and also learning about the different kinds of foods that you can cook. One of the factors in choosing the course, is being chosen and going out of the country to train and learn more about the industry that you have chosen. The experience that you gain will be a valuable asset in finding a job or taking up your Master’s Degree. The importance of choosing Hotel and Restaurant Management course as well as any course available is vital and crucial part of a student, as it will be the building blocks for your success in the future. Students need to be more attentive and interested in our course because it...

Words: 443 - Pages: 2

Frm Syllabus

...2011 FRM EXAM TRAINING SYLLABUS PART I Introduction to Financial Mathematics 1. Introduction to Financial Calculus a. Variables – Discrete and Continuous b. Univariate and Multivariate Functions – Dependent variable and Independent variable c. Physical representation of a function d. Linear and Non-Linear functions e. Limits of a function f. The number e and Natural Logarithm g. Differential Calculus – Differentiation, Interpretation - Slope of a tangent, using derivatives to calculate function values and deltas. Linear functions - 1st order derivative. Non-linear functions – 1st and higher order derivatives, interpretations and usage. Rules of derivatives. h. Functions – Differentiation and Taylor Series Expansion i. Introduction to Partial Derivatives j. Introduction to Integral Calculus 2. Introduction to Bond Mathematics a. Finance and the Time Value of Money b. Concept of Zero Coupon (Discount) Bonds and Coupon Bonds. c. Bond Characteristics d. Bond Types – Fixed Rate, Floating Rate, Inverse Floater Rate, etc. e. Interest Rates – Discrete and Continuous Compounding f. Bond Pricing – using ZCYC or YTMC with discrete compounding or continuous compounding g. Difference between bond coupon rate and bond yield h. Calculating Bond Yield (YTM, CY, MMY, ZCY/Spot, Par Yield, etc.) i. Price Yield Relationship Introduction to Financial Statistics and Econometrics 1. Introduction to Financial Statistics a. Frequency distributions b. Measures of Central Tendency/Location......

Words: 1406 - Pages: 6

Lanterns | Hilary Castaneda | The Middle 7.6