FINANCIAL RISK MANAGEMENT

ASSIGNMENT NO.1

MARKS =15

2.       The assignment must be done in MS-Excel and sent to ims.assign@gmail.com no later March 25, 2011. Remember the subject of the email should follow the following format:

FRM MBA 3 Semester and then group member names

and the file name should be the names of the group members

3.       Delayed submission will cost you 0.5 marks per day

4.       All calculations and detailed steps should be shown in the Excel sheets

Group Members and Their companies

This assignment involves the application of concepts related to market risk models. You are required to collect daily share prices data of the firm assigned to you. Minimum number of observations should be 500. Suppose that your bank has invested Rs.500,000 in each of the the firm assigned to you.

Requirements:

1.       Find volatility of your portfolio with:

a.        simple standard deviation

b.      EWMA

c.       GARCH(1,1)

2.       Calculate VaR of the firm at 95% confidence over 5 days with parametric approach using the measure of volatility as calculated in Req.1

3.       Plot distribution of the returns using class-boundaries of Rs.1500 and explain whether the distribution can be called normal?

4.       Calculate VaR of the firm over 5 days with historical simulation method at 5th percentile