Financial Risk Management
HBC339 Financial Risk Management
HBC343N Advanced Finance
Assignment 2, Semester 2, 2012
Assessment: 13%
Hard copy submissions are required and these can be made to your tutors prior to 18 October OR placed in the convenor’s mailbox (B. Graham, Mailbox No. 18) on Level 12 of the BA building by the due time and date.
Please refer to Submission Requirements below

Global Fund Managers Ltd (GFML) is an Australian based investment company with investments in the Australian domestic debt and equity markets as well various international investments. The company is enabled to enter into derivatives contracts to manage financial risks and to add value to positions should the management team elect to do so.
GFML had funds under management as at 31 August, 2012, as follows:
Investment Type
Amount Portfolio
Beta Representative
Index / Price/Security
Australian Shares (equities) A$240m 1.0 S&P ASX 200
Hong Kong Shares (equities) including Chinese shares listed on the Hong Kong Stock Exchange US$100m 1.3 Hang Seng Index
Gold (in the form of securities in a Gold Exchange Traded Fund or ETF) US$50m 1.0 Gold Price
Short term interest bearing securities (average maturity 90 days). Mainly used for short term liquidity needs and to take advantage of investment opportunities as they emerge. A$20m
US$15m 0 Bank Accepted Bills
Eurodollars

Additional information:
(1) Exchange Rates at 31 August 2012 were:
A$1 = US$1.03 A$1 = HK$8.00
The Hong Kong dollar exchange rate has been pegged at a fixed rate against the United States dollar at a rate of HK$1 = US$7.78 since the early 1980s.
(2) GFML’s capital structure is as follows:
Shareholders’ Equity A$260m
Debt
Variable rate debt:
– Australian dollars A$100m
– US dollars US$ 15m
Fixed Rate Debt $A 50m
GFML also has other minor assets and obligations not included in the above figures.
GFML’s management has assessed the outlook for the asset portfolio for the remainder of the year to 30 December 31, 2012 in the following broad terms:
Equities
• Volatility in world equity markets is expected to continue through to end of calendar year 2012. This view is based on conflicting views about a return to a more robust rate of economic growth in the Peoples’ Republic of China; uncertainty about the outcome surrounding the European debt crisis (slow recovery or economic chaos?) and uncertainty about the strength of the weak recovery in the USA. These uncertainties are, of course, interrelated and are expected to impact the markets and industry segments in which GFML invests differentially depending on the outcomes.
Interest bearing securities
• In Australia, the continuance of the so called “two-speed” economy coupled with the strong (some say ‘over-valued’) Australian dollar and, more recently, falling commodity prices due to weakened global demand have heightened market expectations that the Reserve Bank of Australia (RBA) will cut interest rates by 25 or even 50 basis points by year end. This is by no means regarded as certain.
• The US Federal Reserve has held interest rates steady at a very low level over the past two years in its efforts to stimulate the US economy. It is expected that the next movement in US rates will be upwards but this is not expected to occur before 2014.
Currency
• The Australian dollar has again risen sharply in recent weeks although it has fallen back to around the US$1.03 level at present. There is little consensus on the outlook for the A$/US$ exchange rate over the next four months and into 2013. Weakening commodity prices are expected to exert downward pressure on the A$ but recent purchases of the Australian currency by a number of central banks around the world has supported the currency and so as long as this continues it may remain above parity with the US dollar.
Gold
• Despite some recent weakness in the gold price (in terms of US dollars) gold continues to be a refuge for those seeking the security of an asset that will hold its value in these troubled economic times. GFML management wishes to retain its current level of investment in gold but recognises that a resurgent in the Chinese and US economies may lead investors to sell gold in favour of more risky assets such as equities.
Note: The opinions expressed above are exactly that – opinions and not facts. You may use these opinions as a basis for your recommendations but you may also refute them with contrary evidence or opinions sourced from your own independent research. No correspondence regarding interpretation of the above opinions will be entered into with students for the purpose of completing this assignment.
Required:
Assume that you are a recently appointed hedge strategist with GFML and that you have been requested to prepare a report for presentation to GFML’s Investment Strategy Committee at its next meeting. You have been specifically requested to address the following issues:
(a) To identify and list the specific financial risk exposures faced by GFML with respect to the asset categories listed in the above schedule and the way in which these investments are financed. Bear in mind that GFML is an Australian based fund and that most of its shareholders are Australian residents.
(b) To make firm recommendations on whether or to hedge all, part or none of the financial risk exposures that you identified in part (a) above. You MUST provide some explanation for each of your recommendations. (You are not required to specify the type of derivative to be used to hedge in response to this question).
(c) To make recommendations on which derivative instruments (for example, options, futures, swaps) to use to implement any hedges that you have recommended in part (b) above. Once again, you MUST explain your recommendations. [In the event that you have recommended in part (b) to not hedge any of GMFL’s risk exposures then the marks available for parts (b) and (c) will be combined and your answer to part (b) assessed on that basis. This means that you will need to provide very well researched and fully explained reasons for your responses to part (b). However, it is advised that you make at least some hedge recommendations to make responses to parts (c) and (d) more meaningful]. You are NOT required to propose details of how to implement your hedge recommendations in this part – this is to be done in part (d).
(d) To propose, in accordance with each of your recommendations in (c) above, specific hedging strategies which require you to describe the following:
i. the exposures to be hedged,
ii. what percentage proportion of the exposure is to be hedged,
iii. which derivative(s) are to be used to hedge each exposure,
iv. the number of derivative contracts for each hedge,
v. the delivery months (or duration of swaps) for each derivative, and
vi. the prices at the time of making the recommendation – futures prices, option strike prices (including an explanation of the choice of strike price(s)] and the interest rate for currency swaps (you will need to research this).
For part (d) you may assume that the hedge horizon is mid-December and that you can use futures and options with a December expiration date for hedging.
Also, in part (d) if you recommend option strategies you may also wish to consider strategies that require the ‘purchase and sale’ of two different options (e.g. an option spread) to reduce the cost of the option strategy.

(1 + 3 + 3 + 5 + 1* = 13 marks)
*1 mark for general presentation
Notes
1. You are expected to use actual data for your recommended hedging strategies for requirement (d). Futures and option prices for US contracts can be found at: http://www.cmegroup.com for Australian futures and options at www.sfe.com.au and for Hong Kong securities at www.hkfe.com.hk
2. The price data you use in your assignment will depend on the prices on the date that you access the data. That is, assignments submitted by different students will most likely have different prices.
3. It is your task to research the necessary futures and options contracts and the contract specifications in order to implement your proposed hedge strategies. Assistance will only be provided if it is clear that you have made a substantive research effort.
4. There are no definitive answers for this assignment. Your submission will be evaluated based on the clarity of your report and the quality of your responses to the requirements.
Submission Requirements
1. An assignment cover sheet must be attached to your submission. You must state the name of your TUTOR (Sazali Zainudin or Roshanti Dias) on the cover sheet
2. Your submission is to take the form of a report. It should be concise (no more than 7 typed pages or 1600 words plus any schedules, tables or similar), spell-checked for obvious errors and be clearly expressed.
3. It is preferred that you do this assignment in PAIRS so that you have a partner to discuss the issues with and share the research work (groups of three will not be permitted under ANY circumstances). For students who wish to submit individually that is also acceptable but the requirements are identical.
i. If you work as a pair you need to submit one assignment only;
ii. “Pairs” do not have to be in the same tutorial but please identify this on your cover sheet if this is the case.
4. Late assignments will not be accepted without documentation (medical or otherwise) supporting the application for a deferral. Approval will not be given to applications for special consideration within two days of the due date without electronic submission of what you have prepared up to that point in time. Late assignments will be penalised at the rate of 20 per cent of the available marks per day or part thereof.
5. E-mailed assignments will not be accepted.
6. Make sure that you allow yourself adequate time to complete this report because these guidelines will be strictly enforced and without exception.
7. Plagiarism. Please read the notes on plagiarism in the Unit Outline. Excessive replication of extracts from text books or other sources is neither desirable nor necessary and will be penalised if deemed to be irrelevant and/or if not acknowledged in the appropriate manner.

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Sc/ PgDip Quantity Surveying (Overseas Delivery)
FINANCIAL AND RISK MANAGEMENT- SESSION 2015/16
ASSESSMENT BRIEF
Submission Deadline: Friday 6th May 2016 by 16:00hrs (BST)
This assessment contributes 100% of the marks for the above module
1. BRIEF
1.1. Background
The philosophy behind the assessment regime is that it is an integral part of the
education process and one of the principal drivers to learning. In all assessment
activities, students are encouraged to apply what they have learnt to their own
(project or business) organisation. The assessment will be on the basis of the
extent to which a student has been able to apply subject material to gain new
insight and create or envisage the start of new innovations within the
organisation or profession.
1.2. Task
As a Commercial Manager for a Clampdown Developments Ltd, a fictional
development company, you are tasked with identifying an investment opportunity
and putting forward a development proposal, in a report format, as to how you
would develop the site for consideration by the board of directors of Clampdown
Developments. Therefore, you are required to select a development opportunity
of a significant scale.
The overriding objective of the project is to realise a return on capital. You will
need to consider an outline development plan for the site and based on this
outline you are required to prepare a detailed development proposal from a
finance and risk point of view with particular focus on. Consideration must also
be given to the local authority planning objectives, environmental considerations
and other constraints resulting from the nature and location of the site.
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Clampdown’s Objectives
Clampdown is obviously seeking to obtain a satisfactory financial return on its
investment in any development on the Site. Consideration needs to be given to
risks that may materialise that have an impact on that return bearing in mind,
amongst other issues, the current economic climate and the location of the Site.
Task
The Commercial Director of Clampdown has requested that you present your
detailed proposals to the board of directors in a report format addressing the
following key considerations:
• A brief review of the selected investment opportunity and the
appropriateness, and suitability of the selected site.
• A risk appraisal along with the proposal for an appropriate risk management
system.
• Develop and calculate the project’s financial appraisal considering at least the
following costs:
Pre-development costs, Construction costs, Finance costs, Letting and
promotion, Profit. Cost of land purchase and interest (use the existing
market rate)
• Analyse how fluctuations in variables affect your financial/ risk assessment
Note: make reasonable assumptions/ predictions where necessary.
2. SUBMISSION REQUIREMENTS
FORMAT
Students shall work individually to produce their own reports. The assignment is
to be submitted in report format and as such should have a formal structure and
layout. It should be written to Clampdown Board of directors. Report should be
submitted as a single document.
LENGTH
It should not exceed 6000 words and represent appropriately up to 80 hours of
research application and writing.
REFERENCING
All submissions shall have a reference list (and an optional bibliography), listing
the sources used in the preparation of the report. The School has adopted the
Harvard system (APA 6th) as standard referencing system.
SUBMISSION
This assignment MUST be submitted electronically through Turnitin®
Further information and support for students using Turnitin® can be found here:
http://www.salford.ac.uk/library/help/blackboard-and-collaborate
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3. ASSESSMENT CRITERIA
This coursework shall be assessed according to the following assessment
criteria:
A demonstration of research, appropriate knowledge and
understanding in investment selection and its risk, and financial
implications
10%
An understanding and an ability to critically evaluate and present
appropriate risk management systems 30%
The demonstration of an understanding of the importance of project
variables and its use for development proposals in managing risk
and finance
20%
A critical project appraisal and demonstration of knowledge and
understanding of financial performance, and advice to client 30%
Presentation of report- Layout, structure, visual presentation, use of
language, clarity of expression, referencing within text and
bibliography
10%
Total 100%
MARKING SCALE
The comprehensiveness of the report in covering the essential requirement of the
task; level of understanding, criticality of discussion, evaluation and application of
key assessment tools and techniques on selected case study/ scenario; good
use of citation of quality references and quotations; and conclusions and
recommendations.
At Postgraduate Level 7 the following marking scale shall be used:
Outstanding 90% – 100%
Excellent 80% – 89%
Very good 70% – 79%
Good 60% – 69%
Satisfactory 50% – 59%
Unsatisfactory 40% – 49%
Inadequate 30% – 39%
Poor 20% – 29%
Very poor 10% – 19%
Extremely poor 0% – 9%
LEARNING OUTCOMES ADDRESSED
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Knowledge and Understanding:
• Analyse various risk and value theories and techniques and identify risks
and uncertainties associated with the appraisal of developments
• Critically evaluate alternative developments through appropriate risk,
financial and value appraisal techniques and cost forecasting techniques.
• Develop critical thinking, creativity and innovation related to financial and
risk management in the construction and property sector.
Transferable/Key Skills and other attributes
• Establish criteria for utilising appropriate decision techniques including
identifying, formulating and solving problems related to the construction
and property sector.
• Apply risk and financial management techniques and appropriate
appraisal tools in the construction and property industry.
• Apply risk and financial management techniques to evaluate various
project options and review decisions.
5. RETURN & FEEDBACK ARRANGEMENTS
Coursework marks and feedback will be available within 15 working days of your
submission and will be uploaded into Blackboard.
IMPORTANT INFORMATION
I. OBLIGATION TO KEEP COPIES OF ALL WORK
Students MUST keep a spare copy of all work which they hand in as well as the receipt
which is issued to them at the time of submission.
II. PROVISIONAL NATURE OF MARKS & GRADES
All marks and grades issued to students are provisional until ratified by examination
boards.
III. LAST DATE FOR SUBMISSIONS
Submissions made after 16:00hrs on the fourth working day following submission will be
deemed inadmissible and recorded as a non-submission.
IV. ELECTRONIC SUBMISSIONS
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If the submission document file up-loaded to Blackboard is corrupt and cannot be viewed
– This is classed as a NON submission. It is the responsibility of the student to ensure
their submission material can be opened by others.
To ensure your submission can be opened please follow this simple step:
Go back to the submission area and the blue button that was labelled Submit will
now be a button labelled View – select this button and what you see upon doing
so will be the file/format that your Lecturer can see. If you can open and view the
document then so can the lecturer.
V. PENALTIES FOR LATE SUBMISSION
Where coursework is submitted late, the following penalties shall be applied to the mark:
(a) if the work is no more than four working days late, then five marks shall be deducted
for each working day (08:30-16:00 Mon-Thursday or part thereof) , but if the work
would otherwise pass then the mark for the work shall be reduced to no lower than the
pass mark for the component
(b) if the work is no more than four working days late and marked and the mark is lower
than the pass mark, then no penalty shall be applied;
(c) if the work is more than four working days late then it cannot be submitted and
shall be recorded as a non-submission (NS).
VI. ACADEMIC MISCONDUCT
The University takes a serious view of all acts of academic misconduct. Such acts are
considered dishonest and as attempts to gain unfair advantage. Acts of academic
misconduct can take many forms. They are likely to fall into one or more of the following
categories:
a) Plagiarism
Plagiarism involves taking the work of another person or source and using it as if
it were one’s own.
b) Self plagiarism
Self plagiarism (or double submission) is resubmitting previously submitted work
on one or more occasions (without proper acknowledgement). This may take the
form of copying either the whole piece of work or part of it. Normally credit will
already have been given for this work.
c) Collusion
Collusion occurs when, unless with official approval (e.g. in the case of group
projects), two or more students consciously collaborate in the preparation and
production of work which is ultimately submitted by each in an identical, or
substantially similar, form and/or is represented by each to be the product of his
or her individual efforts. Collusion also occurs where there is unauthorised cooperation
between a student and another person in the preparation and
production of work which is presented
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as the student’s own.
d) Falsifying experimental or other investigative results
This could involve a range of things that make it appear that information has
been collected by scientific investigation, the compilation of questionnaire
results etc whereas in reality it has been made up or altered to provide a more
favourable result.
e) Taking unauthorised material (including electronic devices) into an examination
f) Contracting another to write a piece of assessed work / Writing a piece of
assessed work for another
This involves any means whereby a person does work on behalf of another. It
includes assessments done for someone else in full or in part by a fellow student,
a friend or family member. It includes sitting an examination for someone else. It
also covers obtaining material from internet ‘cheat sites’ or other sources of work.
Penalties for this type of unfair means will normally apply both to a student of the
University who does work on behalf of another and a student of the University
who has work done for him/her.
g) Copying from, or communicating with, another examination candidate during an
examination
h) Bribery
This involves giving money, gifts or any other advantage to an academic member
of staff which is intended to give an unfair advantage in an assessment exercise.
VII. Particular care should be taken in respect of the following:
a) Getting help from others / helping others
Students are encouraged to discuss and share ideas and information, however those
who knowingly assist others to commit academic misconduct whether or not for payment
(e.g. by giving another student the opportunity to copy part or all of a piece of work, by
providing copies of assessments or by providing bespoke assignments to another
student) will be subject to the same penalties as those who use unfair means. Students
must ensure that they protect their own work, submit it themselves and do not allow
other students to use their memory stick and/or print off work on their behalf.
b) Use of Readers/Note Takers
Students with special learning requirements who require the services of readers or note
takers are advised to use appropriately trained individuals. Further advice can be
obtained from the Disability Service Team within Student Life Directorate.
http://www.advice.salford.ac.uk/disability
c) Referencing
Students using work which has been produced by other people within an assignment will
need to ensure that they acknowledge or reference the source of the work. Students
should check with their Schools for particular requirements. Marks may be deducted for
poor referencing. If poor referencing is extensive throughout a piece of work it could
appear that the student is trying to claim credit for the work and he/she may be deemed
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to have committed plagiarism. Guidance on good referencing practice is available from
Schools or may be provided through research training programmes, the Study Skills
Programme located in Student Life and on-line guidance provided by Information &
Learning Services. Some useful resources are: http://www.advice.salford.ac.uk/
Penalties
If satisfied that unfair means has occurred, a penalty will be imposed on the student.
Penalties vary depending on whether the matter is referred to the School Academic
Misconduct Panel or the University Disciplinary Committee and on the particular
circumstances. A range of penalties may be imposed including:
– A penalty of 0% for the assessment component attempted using unfair means;
– A penalty of 0% for the module affected by unfair means;
– A penalty of 0% for the module affected by unfair means and the marks of all
other modules at that academic level being capped at the pass mark (40% for
undergraduates, 50% for post graduates).
In the most severe cases, where there are aggravating factors (e.g. that this is a
repeated case of the use of unfair means by a student at an advanced stage in their
studies), a student found guilty of using unfair means may be permanently expelled from
the University.
Further details of the Academic Misconduct procedure are available from:
http://www.governance.sa