EFB344 Risk Management and Derivatives: 100%

In relation to a commercial bank, for example Suncorp, provide a relevant example of each of the following: a. Credit Risk b. Operational Risk c. Market Risk d. Liquidity Risk In relation to a commercial bank, for example Suncorp, provide a relevant example of each of the following: a. Credit Risk b. Operational Risk c. Market Risk d. Liquidity Risk Question 2 Without performing any calculations, order the following bonds in terms of their interest rate sensitivity. a. 3-year, 10% annual coupon b. 3-year, 10% coupon paid semi-annually c. 10-year,0% annual coupon d. 10-year, 10% annual coupon Question 3 The yield curve is currently flat at 7%. Based on the following information price a bond with annual coupons, a face value of $100.00 with a a. 10% coupon rate and maturity in 2 years. b. 5% coupon rate and maturity in 2 years. c. 10% coupon rate and maturity in 3 years. d. Reprice them all after parallel shift in the yield curve to 8%. Comment on the price changes. Question 4 The risk of equity returns can be measured with either standard deviation or beta. Discuss these two measures of risk and how they relate to each other. Question 5 Discuss two (2) reasons as to why risk management adds value.