Assignment: Expected Shortfall, Value At Risk, Basel III
1- You been hired by a major regional bank in North Carolina with $10 Billion in assets, and the Director of your division wants you to prepare a two-page report to the Board addressing these issues regarding BASLE capital requirements.
A. What are the challenges in Implementing Basle III standards for your bank by 2019?
B. How is Basle IV different from Basle III and what additional requirements it imposes on your bank? What should your bank do to meet these requirements?
C. What are its implications for your bank in terms of cost to meet these requirements, and to the overall financial stability of your institution?
D. What are the major arguments from your bank against Basle IV? On what grounds would you oppose it?
2- V@R: What is Expected Shortfall [ES]? Explain in your own words its similarities and differences from ‘Value at Risk'? Using an assumed example, show how Expected Shortfall and Value at risk concepts help financial institutions manage interest rate risk? What are their respective uses and advantages? Why is Basle III recommending Expected shortfall while earlier it had V@R? Is expected shortfall a more optimal measure for analyzing the impact on Bank's capital? Why or Why not? How do we address the shortcomings of Expected Shortfall?
3 Explain using an example "Interest rate Swap' [IRS]? Illustrate how IRS is used by corporation & bank to hedge risk? Is IRS optimal for risk transfer for banks and Institutions? Why or Why not?
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also include a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also Include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.