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    Assignment 1

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    Truong Nguyen
    This document provides instructions for a group assignment on analyzing a major Australian financial institution. It consists of 3 problems: 1) Analyze the business model, profitability, assets/liabilities, and risks of the institution over 5 years using annual reports. 2) Estimate ARCH and GARCH models using 250 days of share price data and examine differences between the models. Use ARCH to assess bankruptcy risk. 3) Build a risk model relating 5 years of interest rates and share prices to forecast price changes from a 0.25% interest rate increase. Include relevant balance sheet items.

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    Assignment 1

    Uploaded by

    Truong Nguyen
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    This document provides instructions for a group assignment on analyzing a major Australian financial institution. It consists of 3 problems: 1) Analyze the business model, profitability, assets/liabilities, and risks of the institution over 5 years using annual reports. 2) Estimate ARCH and GARCH models using 250 days of share price data and examine differences between the models. Use ARCH to assess bankruptcy risk. 3) Build a risk model relating 5 years of interest rates and share prices to forecast price changes from a 0.25% interest rate increase. Include relevant balance sheet items.

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    This document provides instructions for a group assignment on analyzing a major Australian financial institution. It consists of 3 problems: 1) Analyze the business model, profitability, assets/liabilities, and risks of the institution over 5 years using annual reports. 2) Estimate ARCH and GARCH models using 250 days of share price data and examine differences between the models. Use ARCH to assess bankruptcy risk. 3) Build a risk model relating 5 years of interest rates and share prices to forecast price changes from a 0.25% interest rate increase. Include relevant balance sheet items.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pdf or txt
    1 views1 page

    Assignment 1

    Uploaded by

    Truong Nguyen
    This document provides instructions for a group assignment on analyzing a major Australian financial institution. It consists of 3 problems: 1) Analyze the business model, profitability, assets/liabilities, and risks of the institution over 5 years using annual reports. 2) Estimate ARCH and GARCH models using 250 days of share price data and examine differences between the models. Use ARCH to assess bankruptcy risk. 3) Build a risk model relating 5 years of interest rates and share prices to forecast price changes from a 0.25% interest rate increase. Include relevant balance sheet items.

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    25751 Financial Institution Management Assignment 1

    General comments This assignment is done by groups of 5 students. This assignment is to be submitted in class in Week 7. Full student names and student numbers are to be provided on the cover sheet. The scope of this assignment is limited to 10 pages. All calculations have to be shown. All assignments will be presented in class. You may use the database resources which are available at the university A late submission will result in a 50% mark reduction after 24 hours and a 100% mark reduction after 48 hours (in relation to the marks received).

    Financial Institutions to be analyzed: You will be given one of the following financial institutions: ANZ Bank Commonwealth Bank National Australia Bank Problem 1 [4 marks]: Download the latest annual reports available. a) Explain the business model of the financial institution given to you in class. b) Analyse the profitability, total assets, liabilities, off balance sheet items as well as the book and market value of capital of the financial institution over the past five years. c) Explain at least five risks to which the financial institution is exposed. Problem 2 [6 marks]: Collect a time series of at least 250 days of share prices of your financial institution. a) Estimate an ARCH (1) and a GARCH (1,1) model. b) Explain the difference between these two models. c) Use the ARCH (1) model to estimate the standard deviation of the returns for the last day of your time series. Can you draw any conclusion on the likelihood of a bankruptcy of your financial institution? Problem 3 [5 marks]: Collect a time series of at least 5 years of Australian interest rates and share prices of your financial institution. Build a risk model which forecasts the financial institutions share prices changes in relation to interest rate changes. Include the structure of assets, liabilities and any other items you find relevant into the model. What would be the implication of an interest rate increase of 0.25% on your financial institutions share price?

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