Part A: International Banking Regulation
1. Critically discuss the significance of capital adequacy requirements of Basel III in making the banks safer. Support your arguments with relevant literature.
(750 words, 20 marks)
Part B: Market Risk Estimation
2. You must select 5 corporations of your choice from the same industry. Assume that the analysis is performed on October 1st, 2020. All the data you need to collect must be consistent with this date.
Compute VaR of your portfolio using Variance-Covariance, Historical Simulation and Monte-Carlo methods. Time horizon 1 year. Confidence interval 99%. Calculate the Expected Shortfall. Present your results and discuss the findings.
(750 words, 20 marks)
Part C: Foreign Exchange Risk
3. Discuss with examples the types of foreign exchange risks faced by Financial Institutions. Also, illustrate the hedging strategies used for foreign exchange risk.
(750 words, 20 marks)
Part D: Credit Risk
4. Discuss Credit metrics approach to calculating credit risk. What are benefits and shortcomings of the model? Suggest improvements in the model.
(750 words, 20 marks)
The five corporations should be based in the United Kingdom