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Instructions
For this milestone, you will discuss the potential risks and benefits associated with each of the derivative instruments that you are recommending to address the needs of the problem within the case study scenario—including how these risks and benefits can have an impact on the company’s return. You will examine the external and internal factors (and the potential impact of these factors) that the company will need to consider in its investment decisions.
In addition, you will also calculate the potential price impact of the derivative instruments that you are recommending. These calculations will be included in an Excel spreadsheet, which will serve as an appendix to your final portfolio proposal.
To complete this assignment, review the
Final Project One Milestone Two Guidelines and Rubric
document.
Instructor Feedback
Cheng, you did well but missed one section where you have to create a table showing actual price changes on your derivative instrument. Create the table and put it in and I will re-grade for you.
Price Impact: Spreadsheet Appendix: Take one of your derivative instruments and create a spreadsheet that shows what happens if the underlying asset moves. As an example, take your currency derivative and show what happens if the currency weakens or appreciates by 5%, 10%, and 20%. Put this in a table and you can paste it right into your document.
Please revise my original paper that I got F according to instructor feedback and please focus on every elements in rubric!!!!!!
FIN 670 Final Project I Milestone Two Guidelines and Rubric
Risks and Benefits and Price Impact
Overview: For this first milestone, due in Module Five, you will discuss the potential risks and benefits associated with each of the derivative instruments that
you are recommending to address the needs of the problem within the case study scenario—including how these risks and benefits can have an impact on the
company’s return. You will examine the external and internal factors (and the potential impact of these factors) that the company will need to consider in its
investment decisions. In addition, you will also calculate the potential price impact of the derivative instruments that you are recommending. These calculations
will be included in an Excel spreadsheet, which will serve as an appendix to your final portfolio proposal.
Prompt: First, review the case that you have chosen for your final project, as well as the accompanying spreadsheet for the case, and in a 2- to 3-page paper
address the following critical elements:
II. Risks and Benefits
A. Discuss potential risks and benefits associated with each instrument and how those risks could have an impact on return.
B. Assess the impacts of multiple extrinsic and intrinsic factors that the company will want to consider based on how they influence value and
price.
III. Price Impact (Spreadsheet Appendix)
A. Calculate the potential price impact of extrinsic and intrinsic factors, and expected mitigated risk value of recommended derivative instruments.
Present this information in your spreadsheet, and include it as an appendix.
Refer to the Module Five resources and other course resources to support your responses. Be sure to apply instructor feedback on this milestone to your final
project.
Rubric
Guidelines for Submission: This milestone should be submitted as a Word document, 2–3 pages in length, double-spaced, using 12-point Times New Roman
font, one-inch margins, and the latest edition of the APA manual for formatting and citations.
Critical Elements Proficient (100%) Needs Improvement (75%) Not Evident (0%) Value
Risks and Benefits Discusses potential risks and benefits
associated with each instrument and
how those risks could have an impact
on return
Discusses potential risks and benefits
associated with each instrument, but
explanation of benefits and of how risks
could have an impact on return is
lacking in detail
Does not discuss potential risks and
benefits associated with each
instrument
30
Extrinsic and Intrinsic
Factors
Assesses the impacts of multiple
extrinsic and intrinsic factors that the
company will want to consider based
how they influence value and price
Assesses extrinsic and intrinsic factors
that the company will want to consider
in its investment decisions, but factors
identified are illogical
Does not assess extrinsic and intrinsic
factors that the company will want to
consider in its investment decisions
30
Price Impact:
Spreadsheet Appendix
Calculates the potential price impact of
extrinsic and intrinsic factors and
expected mitigated risk value of
recommended derivative instruments;
information is presented in a
spreadsheet appendix
Calculates the potential price impact of
extrinsic and intrinsic factors and
expected mitigated risk value, but
calculations are illogical
Does not calculate potential price
impact of extrinsic and intrinsic factors
30
Articulation of
Response
Submission has no major errors related
to citations, grammar, spelling, syntax,
or organization
Submission has major errors related to
citations, grammar, spelling, syntax, or
organization that negatively impact
readability and articulation of main
ideas
Submission has critical errors related to
citations, grammar, spelling, syntax, or
organization that prevent
understanding of ideas
10
Total 100%
Running Head: MILESTONE ASSIGNMENT 1
MILESTONE ASSIGNMENT 4
Milestone Two
Cheng Qu
12/21/2017
Existing companies in the modern day business are working upon various risks associated with doing business. The factors such as global currency changes as well as the internal workings of the suppliers and the production together with the customers affect the overall working in the organization. The businesses tend to change from time to time to react to real-time issues and adjust to the necessary environment.
Issues of currency values, as well as fall and the rise in the same, are just some of the challenges that beckon the risks handled by the organization. Arguably, the most visible risks of exposure to the transaction as well as the ones related to financial instruments are the one taking the time of the companies (Lam, 2014). The company, in this case, is more concerned of the currency futures as well as swaps and the options, the mismatches relating to costs and investments are also major issues and is complemented with the revenues.
As the organization makes investment decisions, it will have to be much concerned with the external and internal factors affecting the organization. Such issues include the risks identified across the organization. It is through the risk management that the company are able to handle the impact as the one emanating from the rate of currency and its changes across the organization (Aven, 2010). The main issues on the risk management are understanding the kind of the risk to handle and the instrument that must be checked to ensure that the risk is handled appropriately and efficiently.
In the first instrument, the organization will need not just to understand the rates in terms of currency but also on the fluctuations related to the currency. The use of mathematical risk management tools will be important in analyzing and measuring the risks associated with the organization. They will be important in assessing how the organization reacts to structural a well as portfolio risks as the related transaction risks across different segments. This analysis will be important in understanding the influence value and the prices as per the projected risks.
The management of the above-mentioned risks will be important in managing and reducing the effects of volatility associated with the currency. It will be necessary for helping grows the appropriate diversification of the investment portfolio of the company. The fluctuation will help offset the price changes across the market thus making it simple to bring down the currency risks and all the associated effects in the real terms. It will be less important for any investor in the organization to require or need to facilitate any risk premium as the lowering of the risks will reciprocate to the lowering of the cost of capital for the firm (Manuj and Mentzer, 2008).
With the financial instruments, it is possible to create the hedge between the sizes and the duration of the related risks as per the organization. the hedging of the risks such as the structural risks makes it much possible to react to the operations as well as strategic measures related to the organization while are the same time realizing the opportunities related to the handling of the risks.
The risks benefits identified in the organization are related to the financial instruments and will always affect the return in the organization. the extrinsic and intrinsic factor related to the risks affects the overall value and prices both internally and externally making it important to have the necessary skills in managing the risks. Failure to manage the risks might later work against the wellness of the organization.
References
Aven, T. (2010). Risk management. In Risk Management and Governance (pp. 121-158). Springer Berlin Heidelberg.
Demirgüç-Kunt, A., & Huizinga, H. (2010). Bank activity and funding strategies: The impact on risk and returns. Journal of Financial Economics, 98(3), 626-650.
Manuj, I., & Mentzer, J. T. (2008). Global supply chain risk management. Journal of business logistics, 29(1), 133-155.
Lam, J. (2014). Enterprise risk management: from incentives to controls. John Wiley & Sons.
Running
Head:
MILESTONE
ASSIGNMENT
1
Milestone
Two
Cheng
Qu
12/21/2017
