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Financial Risk Management - Report

   

Added on  2020-06-05

12 Pages2656 Words51 Views
FINANCIAL RISK MANAGEMENT
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Executive SummaryFinancial risk management is highly associated with the formulation of competentframework that helps in reducing the level of undesirable events. It can be summarized from thereport that fall in exports and less cost control finally results in curtailment in workforce whichled to decline in demand in nation and elevation in unemployment rate in the countries. Pressureis observed in the economy of major giants in terms of growth rate. As per latest data, economyof varied nations contract as their PMI and IIP values are below 50. It can be revealed from thereport that , fixed rate swap will be used so that when interest rate increase benefit of spreadbetween cash rate and fixed rate of swap can be obtained. Besides this, it can be inferred thatcurrency swap will be used to hedge position against currency risk. Under this transaction will bedone in the currency swap.
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TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3International economic condition................................................................................................3Domestic economic condition.....................................................................................................3QTC yield curve and forecast and desired positioning of portfolio............................................4Execution of portfolio transactions..............................................................................................4Forecast of foreign exchange movement.....................................................................................5Forecast of commodity price.......................................................................................................5Proposed portfolio transaction.........................................................................................................5Strategy........................................................................................................................................5Quarter 2 deal..................................................................................................................................6Exposure after confirmed deals.......................................................................................................7CONCLUSION................................................................................................................................7REFERENCES................................................................................................................................8APPENDIX....................................................................................................................................10
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INTRODUCTIONFinancial risk assessment is the process which is highly concerned with the identificationof uncertainties associated with the securities. In this, report will provide deeper insight about thelevel of GDP during recessionary period and its impact on foreign exchange market.International economic condition Subprime crisis originated in the USA in the FY 2008 drastically affect global economy.USA is the one of the major economy in the world and major importer as well as exporter ofcommodity in the market. Giant banks like Layman brothers declared themselves defaulterwhich directly affects large and other size corporates in the nation (Santibañez-Aguilar and et.al.,2016). This news trigger turmoil in the USA economy and due to globalization impact of pooreconomic condition of USA is observed on major global economies like UK, Germany, China,Japan and Russia etc. Consistent erosion of profitability of the firms observed in America andEuropean continent, due to consistent decline demand from USA. Fall in exports and less costcontrol finally results in curtailment in workforce which led to decline in demand in nation andelevation in unemployment rate in the countries. Pressure is observed in the economy of majorgiants in terms of growth rate. As per latest data, economy of varied nations contract as theirPMI and IIP values are below 50 (Liu and et.al., 2017). GDP in these nations declined sharplyand bail out packages and quantitative easing programs are launched to support economy andpeople from preventing it from falling in recession. All economic indicators are signaling thatmajor world economies are struggling to maintain their growth rate in current economicenvironment and situation is gradually going out of hands.Domestic economic conditionGDP decline from 5% to 1.5% from 2008 to 2009 on YOY basis. This is directlyreflecting that economy of Australia is contracting. Within a year growth rate of economy shrinkby huge percentage. Decline in growth rate from 5% to 1.5% reflects that recession have heavyimpact on major industries of Australia. Sharp reduction is observed in growth rate of finance,business consulting, mining energy and healthcare industry. Impact of this scenario is observedon unemployment rate where percentage increased from 4% to 5.7%. It can be said thatcondition of Australia is critical.
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