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以下则是请认真答题，珍惜小编的辛勤劳作，答出a1状态。
COURSE8:Fall2005-1-GOTONEXTPAGE
FinanceandEnterpriseRiskManagement;CoreSegment
MorningSession
**BEGINNINGOFEXAMINATION**
FINANCEANDENTERPRISERISKMANAGEMENT;CORESEGMENT
MORNINGSESSION
Questions1-2pertaintotheCaseStudy.
Eachquestionshouldbeansweredindependently.
1.(13points)KellyRatingsrecentlycompletedtheirreviewofZoolanderandsentyouthe
results,whichrecommendadowngradeintherating.TomasLyonhasaskedyouto
provideareportaboutthissituation.
YouhavegatheredthefollowinginformationasofDecember31,2004:
Termnetamountatriskis$3,000million.
WholeLifenetamountatriskis$1,500million.
Thegeneralaccountannuitybusinessis100%GICs.
Prepareareportthataddressesthefollowingpoints.
(a)(2points)Describetherolesofratingagenciesandhowtheyservethesecurities
marketsandthepublic.
(b)(1point)Describehowratingagenciesdevelopanduseliquidityratiosin
assessingafirm’sfinancialstrength.
(c)(4points)CalculateZoolander’scapitaladequacyratioasofDecember31,2004,
basedonKelly’sratingmethodology.
(d)(4points)DescribeaspectsofKelly’sratingsprocessandmodelsthatcouldbe
consideredinferiortothoseusedbyStandard&Poors,Moody’sandFitch
Ratings.
(e)(2points)Listtherequirementstobecomeanationallyrecognizedstatistical
ratingsorganization,asdefinedintheSEC’sproposedrule,anddetermine
whetherKellymeetsthoserequirements.
COURSE8:Fall2005-2-GOTONEXTPAGE
FinanceandEnterpriseRiskManagement;CoreSegment
MorningSession
Questions1-2pertaintotheCaseStudy.
Eachquestionshouldbeansweredindependently.
2.(10points)TomasLyon,Zoolander’sCEO,hasaskedtospeakwithyouabouttwo
concerns:liquidityriskandcreditrisk.
(a)(2points)Describetheformsofliquidityriskfacedbyinsurancecompaniesand
theimportanceofmaintainingadequateliquidity.
(b)(1point)CommentonZoolander’scurrentliquidityposition.
(c)(4points)Lyonisconcernedwithadropinthequalityofthebondportfolio.He
asksyoutobuildamodeltoquantifythepotentialexposureoverthenextyear
duetocreditrisk.Lyonwantsanexpectationaswellasa“worstcasescenario”
basedonaconfidenceintervalof99%.
YouhaverecentlybecomefamiliarwiththeCreditMetricsapproachtomodeling
creditrisk.OutlineaplantodevelopamodelforZoolander,includingthemajor
calculationsandassumptionsneeded.
(d)(3points)Lyonwantstoconsidersecuritizationasameansofreducingcreditand
liquidityrisksandasamanagementtool.
ExplaintheadvantagestoZoolanderofsecuritizing:
i.PrivatePlacementBonds
ii.AClosedBlockofInsuranceLiabilities
COURSE8:Fall2005-3-GOTONEXTPAGE
FinanceandEnterpriseRiskManagement;CoreSegment
MorningSession
3.(12points)Yourcompany,NewWestLife,hasbeenseekingexpansionintotheAsian
market.NewWest’sCEOhasnegotiatedajointventureopportunitywithaChinese
firm,OrientLife.
ThejointventurewillsellinvestmentproductstotheexpandingChinesemiddleclass.
Eachofthetwopartnerswillhave50%ownershipoftheventure.NewWestwillinvest
$600million,andOrientLifewillinvest$400million.Neitherpartnerwillbeableto
exittheventureduringthefirstfiveyears.
Inaddition,NewWestwillhavetheoption,attheendoffiveyears,tobuyOrientLife’s
shareofthepartnership,for$550million.
Youhaveassessedthatthejointventurehasa50%probabilityofincreasinginvalueto
$2,150millionattheendoffiveyearsanda50%probabilityofdecreasinginvalueto
$600millionattheendoffiveyears.Therearenointerimcashflowsexpectedinthe
fiveyearperiod.
Youaregiventhefollowingdata:
NewWestLifeweightedaveragecostofcapital(WACC):k=10%
NewWestLifefeBeta:βNW=1.2
JointVentureBeta:βJV=0.8
MarketReturn:rm=9%
Risk-freeRate:rf=4%
TheCEOofNewWesthasaskedyoutoreviewthejointventureopportunity.
(a)Determinetheappropriaterisk-adjusteddiscountratetousetoassessthis
opportunity.
(b)Assesstheopportunityusinganetpresentvalue(NPV)approach.
(c)Re-*uatethejointventureusingacontingentclaimsanalysis(CCA)approach.
(d)ExplaintotheCEOwhytheNPVandCCAresultsaredifferent.
(e)RecommendtotheCEOwhetherornotNewWestshouldpursuethis
opportunity.Justifyyourresponse.
COURSE8:Fall2005-4-GOTONEXTPAGE
FinanceandEnterpriseRiskManagement;CoreSegment
4.(8points)YouaretheChiefActuaryofGlobalInsurance,apubliccompanysellingonly
UniversalLife,withdivisionslocatedintheU.S.,CanadaandAustralia.Youractuaries
havediscoveredpricinginadequaciesonthein-forceproducts.Global’sCFOisvery
interestedinthevolatilityofthecompany’sresultsduetoboththeforeignexchange
marketsandthepricingissues.
(a)Describetheincome-basedreservemethodologythatGlobalmustfollowineach
jurisdictioninwhichitisconductingbusiness.Includeinyourdescriptionthe
accountingimplicationsofthepricinginadequaciesandtheirimpactonthe
currentyear’scountry-specificincomestatements.
(b)OutlineareportfortheCFOthatincludesthefollowing:
i.TheforeignexchangerisksthatGlobalhasassumed.
ii.ReasonswhyGlobalmightconsiderhedgingthoserisks.
iii.Hedgingstrategiesandinstrumentsthatmaybeusedforcurrency
hedging.
COURSE8:Fall2005-5-GOTONEXTPAGE
FinanceandEnterpriseRiskManagement;CoreSegment
MorningSession
5.(5points)YouhavebeenhiredbySalmonInc.toprovideinvestmentstrategyadvicefor
Salmon’sDefinedBenefitPlan.
Salmon’smanagementisconcernedabouttheaccuracyoftheplansurpluscalculationin
lightofvolatilityofthesurplusoverthepasttwoyears.
Youhavebeenprovidedthefollowingplaninformation:
PlanAssets$240million
PlanLiabilities$250million
Theplan’scurrentinvestmentstrategy,valuationandreportingare:
?Requiredrateofreturnonassetsis7%.Giventhisconstraint,minimizeasset
volatility.
?LiabilityriskisdeterminedusingMonteCarlotesting.
?Discountrateforliabilitiestiedtoexpectedreturnonassets
?TheannualreporttoManagementprovidesabestestimate,20-yearfundinglevel
forecast,measuredonaGAAPbasis.
(a)Describeweaknessesinthecurrentstrategy,valuationandreporting.
Recommendimprovementstobettermanagemarket-relatedrisksofthepension
plan.
(b)Outlinemethodstocontrolpensionplanrisksthatarenotmarketrelated.
COURSE8:Fall2005-6-GOTONEXTPAGE
FinanceandEnterpriseRiskManagement;CoreSegment
MorningSession
6.(8points)MobyLifeisconsideringsellinganin-forceblockofterminsurance.Youare
theappointedactuaryofthecompanyandhavebeenaskedbytheCEOtoestimatethe
fairvalueoftheblockasofDecember31,2005.
Futuregrosscashflowshavebeenprojectedasfollows:
200620072008
Premiums500490486
Expenses&Commissions757473
DeathClaims646666
Assumetherearenofurthercashflowsbeyond2008.
MobyLifereinsures50%ofthebusinessunderacoinsurancetreatyandreceives10%of
cededpremiumasareinsuranceallowance.
Youhavebeenprovidedwiththefollowinginformation:
Risk-freerate:4%
Rateofreturnonassets:8%
Costofcapital:15%
Benchmarkequitytoliabilityratio:10%
Effectivetaxrate:35%
(a)(2points)DescribethedifferencebetweenafairvaluemethodologyandU.S.
GAAPforvaluationofpolicyliabilities.
(b)(4points)Useacost-of-capitalapproachtodeterminethefairvalueofthepolicy
liabilitiesforthetermblockofbusinessasofDecember31,2005.Assumeall
cashflowsoccuratmid-year.Showyourwork.
(c)(2points)TheCEOwouldliketoknowhowmuchthisblockofbusinessisworth
ifitiskeptwithMobyLiferatherthanbeingsold.Suggestanalternatemeasure
forvaluingthebusinessifitisretainedbyMobyLife.Describethedifferences
betweenthismeasureandthefairvaluemethodologyin(b).
COURSE8:Fall2004-7-STOP
FinanceandEnterpriseRiskManagement;CoreSegment
MorningSession
7.(4points)AllegroAnnuityisaninsurancecompanydomiciledintheU.S.thatissuesa
fullrangeoffixedannuityproducts.Startingthisyear,Allegroisrequiredtocomply
withthecashflowtestingC-3arisk-basedcapitalrequirement.Thecompanyhashired
youtohelpthemunderstandtheimpactofthisrequirement.
(a)ComparetheC-3acashflowtestingrequirementwiththefactor-basedC-3a
requirement.
(b)AllegrocurrentlyholdsstatutoryreservesthatarecalculatedusingtheCARVM
methodologyandmeetminimumregulatorystandards.
ExplainwhyAllegromaystillberequiredtoholdadditionalcapitalundertheC-
3acashflowtestingrequirements.
**ENDOFEXAMINATION**
MORNINGSESSION
COURSE8:Fall2005-8-GOONTONEXTPAGE
EnterpriseRiskManagementSegment
AfternoonSession
**BEGINNINGOFEXAMINATION**
ENTERPRISERISKMANAGEMENTSEGMENT
8.(8points)DesperateHousefires(DH)isapropertyandcasualty(P&C)insurance
companyspecializinginhomeinsurancecoverage.SmashandCash(SC)isaproperty
andcasualtyinsurancecompanyspecializinginautoinsurance.
InOurArms(IOA)isaninsuranceholdingcompanythatwishestopurchaseaP&C
company.IOAwantsto*uatetheinsolvencyriskofDHandSC.
IOAplanstoimplementthefollowinginitiativesintheacquiredcompany:
?Thetargetfortheexpectedpolicyholderdeficitriskmeasurewillbe2.5%or
below.
?DynamicFinancialAnalysiswillbeinstituted.
Youaregiventhefollowingdata:
DesperateHousefiresSmashandCash
Assets:10075
ScenariopxDesperateHousefires
ExpectedLoss
SmashandCash
ExpectedLoss
10.25050
20.610070
30.2150100
(a)ForDHandSC:
i.Calculatetheexpectedpolicyholderdeficitforeachcompany.
ii.Comparetheriskofinsolvencyofthetwocompanies.
iii.Determinethelevelofadditionalassetswhicheachcompanywould
needtohaveinordertomaintainthetargetexpectedpolicyholder
deficitrequiredbyIOA.
iv.Calculatethecapitalheldbyeachfirm,assumingtheadditionalassets,
ifany,determinedin(iii)arecontributedtoeachcompany.
(b)DescribethepurposesandusesofDynamicFinancialAnalysis.
(c)DescribetheelementsthatshouldbeconsideredindesigningaDynamic
FinancialAnalysissystemforIOA.
COURSE8:Fall2005-9-GOONTONEXTPAGE
EnterpriseRiskManagementSegment
AfternoonSession
9.(6points)WindyCityLifeInsuranceCompanysellsUniversalLifeandTerminsurance
totheaffluentmarket.TheULproductisamarketleader,mainlybecauseitutilizes
state-of-the-artandproprietaryinvestmentmanagementstrategies.Thecompany’ssales
havebeenstrongoverthelastthreeyearsandareonpaceforanotherrecordyear.
However,thelargeamountofnewbusinesshasdepletedthecompany’scapitalbase.
TheseniormanagementteamatWindyCityhasidentifiedgrowthopportunitiesforthe
organization,buttheyneedtofreeupcapitalinordertopursuethoseopportunities.
Managementiscontemplatingseparatefinancialreinsurancetransactionsforeachofthe
twolinesofbusinessasawaytoprovidesurplusrelief.Becausethecompanyhasnever
usedreinsuranceinthepast,WindyCitywouldliketokeepthereinsurancestructureas
simpleaspossible.
WindyCityhashiredyouasaconsultantondevelopmentofafinancialreinsurance
program.
(a)(3points)Describethestructureofthreealternativeformsoffinancial
reinsuranceandtheproductsforwhicheachistypicallyused.Includethe
advantagesanddisadvantagesofeachform.
(b)(2points)TakingintoaccountWindyCity’spreferenceforasimplestructure,
recommendanappropriatefinancialreinsuranceplanfor:
i.TheTermlineofbusiness
ii.TheUniversalLifelineofbusiness
Defendyourrecommendations.
(c)(1point)Explainusesoffinancialreinsuranceotherthansurplusrelief.
COURSE8:Fall2005-10-GOONTONEXTPAGE
EnterpriseRiskManagementSegment
AfternoonSession
10.(6points)NirvanaNoveltiesisatheme-basedorganizationsellingconvenienceitemsat
gasstationsandtruckstopsthroughoutNorthAmerica.Nirvanaisaprivatelyheldfirm
withnodebt.
YouaregiventhefollowingcurrentinformationforNirvana:
Annualearnings:$7.5million
Assets:$225million
Liabilities:$160million
Youaregiventhefollowingassumptions:
MarketCapitalizationRate:10%
EffectiveTaxRate:0%
CostofDebt:9%
AtarecenttradeshowinLasVegas,Nirvanabecameinterestedinexpandingintothemebased
keychains.Assumethatfutureinvestmentinthekeychainmarketgeneratesa
15%returnandthatthenetpresentvalueofthisinvestmentwillbe$50million.
(a)CalculateNirvana’sbookvalue,tangibl*ue,andtheprice-to-earningsratio,
priortoexpansionandleverage.
(b)Calculatetheupdatedprice-to-earningsratioforNirvanawith50%ofthe
expansioncostfinancedbydebt.
(c)Describetheimpactonfranchis*ueofassuminganeffectivetaxrategreater
thanzero.
(d)Oneofyourcolleagueshasassertedthat,“regardlessofafirm’sfinancial
structure,thefundamentalbasisforhighP/Esisaccesstosubstantialfranchise
investment.”
Defendorrefutethatstatement.
COURSE8:Fall2005-11-GOONTONEXTPAGE
EnterpriseRiskManagementSegment
AfternoonSession
Questions11-12pertaintotheCaseStudy.
11.(8points)AsthenewCFOofZoolander,youcallPeterFish,theCIO,todiscusshisnew
derivativeinitiative.Yousharesomeofyourconcernsregardingoversightandrisk
managementwithrespecttothisinitiative.Peterassuresyouthathisteamwouldbe
receptivetoauditreviewsbutdoesnotwanttoseetheteamconstrainedintheirday-today
operationsandintheirabilitytoachievetheirprofitobjectives.
(a)Identifythepotentialoperationalriskexposuresthatarecontainedintheproposed
derivativeinitiative.
(b)ReferencetheGroupofThirty(G-30)recommendations,andforeachsuggest
changestoZoolander’sderivativeinitiativethatwouldreduceoperationalrisk
concerns.
12.(6points)ZoolanderisrequiredtocomplywithSection404oftheSarbanes-OxleyAct
bysubmittinganannualreportwithrespecttointernalcontroloverfinancialreporting.
Inpreparation,theBoardofDirectorshasaskedyouforthefollowingitems.
(a)(1point)Identifythespecificassurancesthatmustbemadewithrespectto
internalcontroloverfinancialreportingundertheAct.
(b)(2points)IdentifyotherspecificareastheBoardofDirectorsshouldquestionand
discusswithmanagementtodetermineifinternalcontrolsoverfinancialreporting
aresoundandeffective.
(c)(3points)Preparearesponsetothreeofthequestionsyouidentifiedin(b)as
theyapplytoZoolander,citingspecificexamplestosupportyouranswer.
COURSE8:Fall2005-12-GOONTONEXTPAGE
EnterpriseRiskManagementSegment
AfternoonSession
13.(10points)Yourcompany,GlobalDynamicLife&Annuity(GL&A),iscurrently
consideringofferinganEquity-IndexedAnnuityproduct.Therearefourproposed
designsunderconsideration,eachemployingadifferentindexmethodology:
i.Point-to-Point(PTP)
ii.CompoundAnnualRatchet(CAR),witha2%floor
iii.SimpleAnnualRatchet(SAR),witha0%floor
iv.HighWaterMark(HWM).
Theproductbeingconsideredisa5-yearsinglepremium$1,000contractwitha
guaranteeof2%on93%ofthepremium.Foreachequity-linkedoption,aparticipation
rateof65%willbeused.
Youareprovidedwiththefollowingadditionaldataandinformationformodeling
purposes:
?Risk-freerateofinterestfornextfiveyears:5%
?Returnsonequity-linkedindexfornextfiveyears:
Year1:7%
Year2:1%
Year3:6%
Year4:10%
Year5:-18%
?Expensesareassumedtobe1.5%ofpremium.
(a)(6points)Usingthedataandassumptionsprovided:
i.Calculatethepayoffattheendofthefifthyearundereachofthefour
contractdesigns.Showyourwork.
ii.Calculatethepercentageofthepremiumthatwouldbeavailabletopay
fortheindexationbenefit.Showyourwork.
(b)(2points)Foreachproposedcontractdesign,describetheapproachyouwould
usetodeterminewhethertheproposeddesignallowsforsufficientpremiumsto
purchasecalloptionsfortheindexguarantee.Youdonotneedtocompletethe
calculations.
(c)(2points)Rankthefourmethodologiesaccordingtoyourexpectationsofthe
optioncostundereachindexationmethodandexplainyourrationale.
COURSE8:Fall2005-13-GOONTONEXTPAGE
EnterpriseRiskManagementSegment
AfternoonSession
14.(10points)Yourcompany,JabbaandAssociates,hasaclientwhoseentireholdingsare
investedintwostocks:
NumberofSharesCurrentPriceperShareCurrentValue
StockA(SA)1million$10.00$10,000,000
StockB()SB2million$5.00$10,000,000
Total$20,000,000
Youhavebeenprovidedthefollowingdata:
Variance-Covariance:ThresholdLimitsasaFunction
(basedondailyhistoricalobservations)oftheConfidenceLevel:
StockAStockB99.97%-3.43
Average0.10%0.05%99.87%-3.00
StandardDeviation2.00%1.00%99%-2.33
CorrelationCoefficientρA,B=0.295%-1.65
HistoricalSimulation:
MonteCarloSimulation:
Rank10-dayReturnsRank10-dayReturns
100-9.6%1000-15.7%
99-8.9%999-15.3%
98-7.9%::
::991-14.9%
90-7.1%990-14.7%
89-6.9%989-14.4%
::::
501.1%5000.8%
::::
113.4%113.2%
103.7%103.5%
::::
28.2%29.1%
19.0%110.4%
COURSE8:Fall2005-14-GOONTONEXTPAGE
EnterpriseRiskManagementSegment
14.Continued
(a)(6points)CalculateVaRsatthe99thpercentileonacomparablebasisundereach
ofthefollowingapproaches.Showyourwork.
i.Variance–Covariance
ii.HistoricalSimulation
iii.MonteCarlo
(b)(2points)ExplaintoyourclienthowtointerpretVaRandwhyVaRmayvary
usingdifferentapproaches.
(c)(2points)DescribetheprosandconsofeachoftheabovethreeVaRapproaches.
COURSE8:Fall2005-15-STOP
EnterpriseRiskManagementSegment
AfternoonSession
15.(6points)DarthInsuranceCompanyisconsideringsellingaone-yearsegregatedfund
maturityguarantee.Theunderlyingfund,EquityAssetFund,isanindexfundwhose
returnstracktheS&P500.
Dataandassumptionsassociatedwiththisproductare:
?CurrentunitpriceofEquityAssetFund:$1,050
?Guaranteedfundvalueattheendoftheyear:$1,092
?Risk-FreeRate:5%peryear
?DownwardmovementntfactorforEquityAssetFund:d=0.9
?UpwardmovementfactorforEquityAssetFund:u=1.1
?TheEquityAssetFundreturnshavealognormaldistribution.
(a)Usingaone-periodbinomialtree,determinethecompositionandvalueofthe
risk-freehedgeportfolioattheendofyearone.Showyourwork.
(b)Re-calculateth*ueofthehedgeportfolioattheendofyearoneassuming
managementfeesare1%.Showyourwork.
(c)Explainwhythehedgecalculatedisunlikelytobecompletelyeffective.
**ENDOFEXAMINATION**
高顿网校之名人名言：思想上的错误会引起语言上的错误，言论上的错误会引起行动上的错误。 —— 皮萨列夫
