MIB Managing Risk in International Business

7/21/2019 MIB Managing Risk in International Business

1/20

Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r

MANAGING RISK IN

INTERNATIONAL BUSINESS

!ehniques an+ Appliations!ehniques an+ Appliations


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The Three Steps to Effective

International Risk

Manageent

+enti* the in+ivi+ual ris's+enti* the in+ivi+ual ris's Assess ris' ma.itu+es an+ e/posure levelsAssess ris' ma.itu+es an+ e/posure levels

norporate the ris' assessment in thenorporate the ris' assessment in the

+eision ma'in. proess+eision ma'in. proess


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!olitical Risk

e*initione*inition

1oures1oures Assessment tehniquesAssessment tehniques


4/20


Mo"ern Tools of #inancial

$ecision Making

Require+ input"Require+ input"ARKE! A!AARKE! A!Aean-variane analsisean-variane analsis

Contin.ent laims analsisContin.ent laims analsiso+i.liani-illero+i.liani-iller


5/20


Shortcoings of Tra"itional

Techni%&es nsuite+ to mo+ern *inanialnsuite+ to mo+ern *inanial

+eision ma'in.+eision ma'in.

+ata+ata

parametersparameters

appliationsappliations

5enerall impreise an+5enerall impreise an+

+i**iult to appl+i**iult to appl


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The Ne' #rae'ork

Overcoes These

Shortcoings ses mar'et +ata 6internationalses mar'et +ata 6international

pries7pries7

5enerates parameters ompati)le5enerates parameters ompati)le

8ith mo+ern port*olio an+ option8ith mo+ern port*olio an+ option

priin. theorpriin. theor


7/20Ephraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*rEphraim CLARK, 43 rue Louis Rouquier, 92300 Levallois-Perret, Frane, !el" 33-#-4$-%$-$2-34& elar'(lu)-internet&*r

Generating the $ata(

#o&r Steps

Esta)lish aountin. +isiplineEsta)lish aountin. +isipline

e*ine inome *lo8se*ine inome *lo8s

e*ine e/pen+iture *lo8se*ine e/pen+iture *lo8s

Lin' inome an+ e/pen+iture to the )alaneLin' inome an+ e/pen+iture to the )alane

sheetsheet



Iportant Ne' $ecision

Making !araeters

aroeonomi pro*itsaroeonomi pro*its

ar'et value o* the eonomar'et value o* the eonom

!he eonoms rate o* return!he eonoms rate o* return

!he eonoms *inanial ris' premium!he eonoms *inanial ris' premium

!he eonoms sstemati ris' 6)eta7!he eonoms sstemati ris' 6)eta7



Assessing )o&ntr* Specific

#inancial Risk

Estimate stan+ar+ +eviation o* ountr rateEstimate stan+ar+ +eviation o* ountr rate

o* returno* return Estimate total amount o* *orei.n +e)t an+Estimate total amount o* *orei.n +e)t an+

its +urationits +uration

Appl the in*ormation in the :la'-1holesAppl the in*ormation in the :la'-1holesoption priin. *ormulaoption priin. *ormula



Ne' !araeters( E+aples

!he *inanial ris' premium!he *inanial ris' premium

nsolven or illiqui+itnsolven or illiqui+it

!he ma/imum +e)t level!he ma/imum +e)t level

mplie+ volatilitmplie+ volatilit



A Big ,&estion

;E1 !



)LARK vs -

EUROMONE.

The #orecast /011

!he Clar' *oreast"!he Clar' *oreast"EuromoneyEuromoney, 1eptem)er, 1eptem)er

#9>>, pa.e 234#9>>, pa.e 234?0 ountries?0 ountries

!he ER;;@E *oreast"!he ER;;@E *oreast"EuromoneyEuromoney,,

1eptem)er #9>>, pa.e 23%1eptem)er #9>>, pa.e 23%##$ ountries##$ ountries



)LARK vs- EUROMONE.

The Res&lt /002

0

0,2

0,4

0,6

0,8

1

1 5 9 13 17 21 25 29 33 37 41 45 49 53 57

Exhibit 6.9 - Percent of Unreschedued !ebt "t E"ch

#"n$

%"r$

Euro&one'



Estiating S*steatic Risk

Construt the


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!erforance Meas&reent

@!ER@A!;@AL@!ER@A!;@AL

P;R!F;L;1P;R!F;L;1


16/20


Mone* Market !ortfolios

/0134/00/Optimized GDP weights Equal weights Jap-Ger-Switz

Arithmetic.

mean

#3B #2B ##&>B ##&0B

Geometric

mean

#2&$B ##&2B ##B 9&9B

Standard

deviation

$&%B #3&3B #2&4B #%&$B

Return/SD #&$33B 0&902B 0&9%2 0&$0#B


17/20


Long Ter Governent Bon"

!ortfolios

/0134/00/Optimized GDP weights Equal weights Jap-Ger-Switz

Arithmeticmean

#4B #2&4B #2&%B ##&>B

Geometric

mean

#3&%B ##&?B ##&>B #0&>B

Standard

deviation

##B #3&2B #3&2B #%&$B

Return/SD #&2$3B 0&939B 0&9%0B 0&$%3B


18/20


E%&it* !ortfolios

/0134/00/Optimized Equal weights

with US

Equal weights

without US

Jap-Ger-Switz

Arithmetic

mean

20#B #%&>9B #?&$$B #$&4%B

Geometric

mean

#$&44B #4&2B #4&>3B #4&92B

Standard

deviation

2%&%?B 20&?4B 22&0>B 2%&>%B

Return/SD 0&$>?>B 0&$?&99B 0&$%9?B 0&?$%0B


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E+cess Ret&rn to Risk for

Selecte" !ortfolios

/0134/00/Optimized Equal Weights Jap-Ger-Switz

Money market 0&$00 0&33# 0&2#0

LT govt. bond 0&%?$ 0&3?4 0&2?#

Equity index 0&4>4 0&409 0&3$%

1oure" E& Clar', A .eneral nternational mar'et in+e/D, International Journal o !inan"e,

vol& 3, 6#99%7 #2>>-#3#2


20/20

Ephraim CLARK 43 rue Louis Rouquier 92300 Levallois-Perret Frane !el" 33-#-4$-%$-$2-34 elar'(lu)-internet *rEphraim CLARK 43 rue Louis Rouquier 92300 Levallois-Perret Frane !el" 33-#-4$-%$-$2-34 elar'(lu)-internet *r

O&tline

:rie* revie8 o* tra+itional international ris':rie* revie8 o* tra+itional international ris'

analsisanalsis

Presentation o* ne8 tehniquesPresentation o* ne8 tehniques

AppliationsAppliations

+iret investment+iret investment

port*olio investmentport*olio investment

ross )or+er loansross )or+er loans

Documents

MIB Managing Risk in International Business