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Hi, i need some help completing this work item. Thanks Question 1 (10 marks) (a) Calculate the Repricing Gap over the 12 month time period
Hi, i need some help completing this work item. Thanks
Question 1 (10 marks) (a) Calculate the Repricing Gap over the 12 month time period from 30 June 2017. (b) What is the impact on the bank's earnings as a result of a 1% increase in interest rates using the results in (a) above? (c) Do you consider that the result in (b) is useful in assessing the bank's risk exposure? Give reasons identifying any alternative approaches or enhancements that could be used. Question 2 (15 marks) (a) Calculate the Duration of the assets and liabilities subject to interest rate risk and the Leverage Adjusted Duration Gap based on market interest rates as at 30 June 2017. Market interest rates should be sourced from the 'statistics' section on the RBA website [http://www.rba.gov.au/statistics/tables/]. (b) What is the estimated change in the market value of equity as a result of a 1% increase in interest rates across the board using the Duration model? Compare your answer with that in Q1 (b) and explain any differences between the results. (Word limit: 300 words) (c) What are the key assumptions on which the assessment of interest rate risk in your answers in (a) and (b) are based? To what extent do you consider that these assumptions limit the usefulness of the results? Question 3 (10 marks) You have assessed that Well-done's portfolio volatility is highly correlated to 3-year Commonwealth Government securities. Source data from the RBA website [spreadsheet: Capital Market Yields] for the period 1-July-2016 to 30-June-2017 and calculate the daily PAMY at a 95% confidence interval assuming a normal distribution. Question 4 (10 marks) What is Well-done's DEAR? Question 5 (20 marks) What strengths and weaknesses are there in the approach used to arrive at the answer to Q4? In assessing this you should consider the extent to which this measurement will assist the bank's management in assessing the portfolio's risk profile. (Word limit: 500 words) Part B [35 marks] The bank has assessed the credit risk on the loan portfolio to be larger than desired. What specific actions would you recommend to manage this risk and how will these affect the bank's risk position? Give reasons. (Word limit: 600 words) |t isagajnst cur pain-f for tLrtars ta \"rile papers for students and-far canale'be entie r.-5:-'.iElm-T131113~ HW'E'FEF. trbars may prmide guidanee. rEeard'n hep. and editing to md-ce sue yuu have he feednack neeejsary to sabre and understand y'all quatian. Unfortunately'our qualicun has been detected as breaking nu Honor Dede poicy and will be GEI'EEIHEd. In the future. please provide any materialytu may have begun and ensue rm: rptian Heart}.r cutting the mnceptfslcillwu are tying to better understand. Far further infarrnatian. please refertahttpstnwemrsehermman-nrcadef arycuu may mutant us at supp-arbcmsehemmrn |t isagajnst cur pain-f for tLrtars ta \"rile papers for students and-far canale'be entie r.-5:-'.iElm-T131113~ HW'E'FEF. trbars may prmide guidanee. rEeard'n hep. and editing to md-ce sue yuu have he feednack neeejsary to sabre and understand y'all quatian. Unfortunately'our qualicun has been detected as breaking nu Honor Dede poicy and will be GEI'EEIHEd. In the future. please provide any materialytu may have begun and ensue rm: rptian Heart}.r cutting the mnceptfslcillwu are tying to better understand. Far further infarrnatian. please refertahttpstnwemrsehermman-nrcadef arycuu may mutant us at supp-arbcmsehemmrnStep by Step Solution
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