7/30/2019 Essay Mid-Semester Exam_6 August 2013
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QUESTION 1 MID-SEMESTER EXAM: ESSAY
[50 MARKS OUT OF 100 MARKS TOTAL]
EFN505: FINANCE RISK MANAGEMENTSEMESTER 2, 2013
Background:
As financial instruments become more integrated and competition
increases, financial
institutions need a clearer understanding of the risks they are
taking to protect their
assets. It is the risk manager's job to foster this and develop
system-wide risk
awareness.
Brought about by Basel II, financial institution must set aside
capital reserves for
market risk, credit risk and operational risk. Their main goal
is not to eliminate risk, butrather to be proactive in assessing
risk for their own survival. While this is clearly a
worthy aim, the implementation of formal risk measurement is far
more difficult than
what academics tell us, this is evident from the sub-prime
crisis.
The reasons fall into several main groups. First, risk only
matters when looking into the
future, but measurement is done looking at the past. Surely, we
must be missing
something! Second, most finance practitioners think about cause
and effect in a simple
linear way. In reality, most processes are highly non-linear,
making the actual impact
(X) of an event () on the process, difficult to model. As
evidenced by the sub-prime
crisis, even a few very small correlated events can have huge
impacts on where you end
up. Third, if small events can have large impacts on complex
systems, then even
knowing 99 per cent of what you need to know may leave you
vulnerable to large
errors. And 100 per cent knowledge is simply impossible!
Finally, most economic
systems respond spontaneously what happens is influenced by how
we perceive what
will happen a behavioural aspect that we have not yet even
started to model.
In light of the above and given the numerous simplifying
assumptions that finance
practitioners always impose to make their risk models tractable
we simply may not be
measuring anything about risk and we may well need to change
what we believe in.
Objective:
The aim of this essay is to develop your critical thinking
skills by engaging with and
responding to theoretical and practical issues in risk
measurement.
7/30/2019 Essay Mid-Semester Exam_6 August 2013
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Task:
Your task is to write an opinion piece for TheAustralian
Financial Reviewentitled:
Everything You Think You Know about Risk Seems Unhelpful and
is
Probably Wrong.
The essay should be no longer than 1200 words long and must be
uploaded as a
Microsoft Word document (StudentName_StudentNumber.docx) on
Blackboard.
References should appear in endnotes to the essay.
Include in your submission a one-page self reflection where you
reflect on your
learning when writing this piece, including sourcing and
assimilation of literature,
critical thinking and organising your thoughts.Due Date:
Week 6: Friday 30 August 2013 at 6 pm (upload on Blackboard)
How to write a killer opinion piece:
http://www.writersdigest.com/writing-articles/by-writing-goal/improve-my-
writing/10-rules-for-writing-opinion-pieces
http://www.atlantic-
community.org/index/view/How_to_Write_a_Convincing_Opinion_Article
http://nadabs.tripod.com/writing/#process
or ... simply put how to write an opinion piece into Google and
you will find lots of
helpful tips.
To Get the Solution of This
Assignment, Please Contact at
[email protected]
http://www.writersdigest.com/writing-articles/by-writing-goal/improve-my-writing/10-rules-for-writing-opinion-pieceshttp://www.writersdigest.com/writing-articles/by-writing-goal/improve-my-writing/10-rules-for-writing-opinion-pieceshttp://www.writersdigest.com/writing-articles/by-writing-goal/improve-my-writing/10-rules-for-writing-opinion-pieceshttp://www.atlantic-community.org/index/view/How_to_Write_a_Convincing_Opinion_Articlehttp://www.atlantic-community.org/index/view/How_to_Write_a_Convincing_Opinion_Articlehttp://www.atlantic-community.org/index/view/How_to_Write_a_Convincing_Opinion_Articlehttp://nadabs.tripod.com/writing/#processhttp://nadabs.tripod.com/writing/#processhttp://nadabs.tripod.com/writing/#processhttp://www.atlantic-community.org/index/view/How_to_Write_a_Convincing_Opinion_Articlehttp://www.atlantic-community.org/index/view/How_to_Write_a_Convincing_Opinion_Articlehttp://www.writersdigest.com/writing-articles/by-writing-goal/improve-my-writing/10-rules-for-writing-opinion-pieceshttp://www.writersdigest.com/writing-articles/by-writing-goal/improve-my-writing/10-rules-for-writing-opinion-pieces
