ASSIGNMENT 02

Risk management

Risk management is a part of treasury management mid office .It is the activity of monitoring various types of risks and managing their impacts. Effective treasury management is mainly about the management of risk. These risk are Interest rate risk, liquidity risk and credit risk and requires careful monitoring and management in a investment and debt portfolio. In the business context, risk refers as the variability of potential future returns.It is quantified as the standard deviation of the future returns. It is often measured by the standard deviation of historic returns, though this process is essentially errorprone when used for forecasting or risk management purposes.

The objective of risk management is to increase the probability of positive events and decrease the probability of negative events and their effects. Risk Management include:Operational risk It covers various types of business and financial risk which include strategic, gearing, market operational, and technology. It deals with the insurance market and its products. Commodity risk Managing commodities, commodity futures. Credit risk Managing credit and counterparty risk, credit analysis, credit insurance, credit ratings ,credit derivatives ,collateral securitization. It also deals with the credit risk models, Basel II norms, durational hedging. Foreign Exchange risk It is the risk associated with the transactions and economic exposures and the techniques for managing this forex risk. It includes financial instrument such as forward forex and currency swaps.
Name Divya Ranjan Roll no - 302414

Interest rate risk These are the risk related to the interest rates in the prevailing market condition .It includes fixed/floating rates, interest rate swaps, duration and financial instruments like FRAs, options .

Risk Management Tools are : Valuation Treasury values debt, Over The Counter derivatives and cash investments using current, future and historic rates. It provides true values ,net present values and cash flows of the trade, different types of assets class. Portfolios.

Risk analytics It provides deep insights on the drivers of values and financial risk, helping you deliver odified hedging and funding solutions. This is supported by the capability to link underlying and derivatives to understand the effective point, filtering of largest exposures and modified scenario planning.

Scenario Planning It provides modified scenario planning, allowing you to quantify changes and consider future eventualities.

Customized Reporting These have a range of customizable reports which can be delivered automatically to keep you alert and reinforce your brand with clients. Trade repository It provides a secure environment for clients and proprietary information, supported by automatic tracking and on-demand recall.

Name Divya Ranjan

Roll no - 302414

Tools of Risk Management are : Currency Futures

Derivatives markets are used as the hedging techniques to address the foreign exchange exposures that companies faces.

Financial Futures
These instruments can be used for hedging their capital market exposures .These instruments are stock futures. interest rate future ,stock options.

Commodity futures Hedging in Futures Opting for Options

Name Divya Ranjan

Roll no - 302414