PART 1:
QUESTION 1:
Determine and analyse the duration and convexity approach to interest rate risk.
QUESTION 2:
Operational risk can be assessed either by using a quantitative approach. Explain and analyse that statement.
QUESTION 3:
Value-at-Risk (VaR) is defined as the probability of suffering a loss in excess of a given threshold or confidence interval. Can you analyse and appreciate the existing VaR methodologies in terms of market risk evaluation?
QUESTION 4:
The Basel 2 Agreement defines Counterparty Credit Risk (CCR) as the risk that the counterparty to a transaction could default before the final settlement of the transaction's cash flows. Do you think the new Credit Value Adjustment (CVA) methodology is the most appropriate approach to assess the CCR related to over-the-counter transactions?
PART 2:
You have been asked to write a financial risk brief report for National Trust Banking Corporation's senior management. Your work should both address the bank's potential concerns and questions, and take into account the fact that your audience's participants are NOT necessarily risk management experts.
Your brief report will have to answer the following questions:
Determine and analyse the bank's liquidity risk situation, between 2010 and 2011, by using traditional liquidity ratio analysis, and evaluate its potential change with respect to the new Basel 3 approach of liquidity.
|
(Million USD)
|
2011
|
2010
|
2009
|
2008
|
|
Net interest income
|
7.623
|
7.387
|
6,265
|
5.328
|
|
Net fees & commissions income
|
3.370
|
2,941
|
2.661
|
1,881
|
|
Net trading income
|
2,890
|
2,405
|
1.261
|
920
|
|
Other operating income
|
1,301
|
1,235
|
880
|
491
|
|
OPERATING INCOME
|
15,184
|
13,968
|
11,067
|
8,620
|
|
OPERATING EXPENSES
|
-7,952
|
-7,611
|
-6,215
|
-4,796
|
|
OPERATING PROFIT Before IMPAIRMENT LOSSES 8, TAXATION 1
|
7,232
|
6,357
|
4,852
|
3,824
|
|
Impariment losses on loans and advances & other credit risk provisions
|
-2,000
|
-1,321
|
-761
|
-629
|
|
Other impairment
|
-102
|
-469
|
-57
|
-15
|
|
Profit from associates
|
21
|
1
|
1
|
-2
|
|
EARNINGS BEFORE TAXATION
|
5,151
|
4,568
|
4,035
|
3,178
|