Risk Management

TABLE OF CONTENTS :

Introduction

I/ Describe the advantages and disadvantages for each of the following risk measures:

A/ DV01

B/ Stress testing

C/ Scenario testing

D/ Value at Risk

II/ In implementing a VaR model, what considerations would you give to each of the following:

A/ Product complexity

B/ Liquidity

C/ Diversity of trading products

D/ Cost

E/ Technology

III/ You have been asked to do a risk management review of a medium sized hedge fund. What are the factors you would consider in evaluating the effectiveness of their risk management capabilities? Why are these factors important in effecting risk management?

 IV/ Consider a portfolio that consists of Treasuries, corporate bonds, interest rate swaps and options.

A/ Describe in the limit structure you would put in place to manage this trading book

B/ Describe the risk measures you would use to manage the risks in the book.

References?