KRISHNA UNIVERSITY MBA SYLLABUS MBA 308 F- RISK MANAGEMENT & INSURANCE

UNIT I Understanding Risk: Types of risk - Risk Management & Control Risk Management Process Methods Cost of Risk Maximizing Value by Minimizing the Cost Measuring the Cost of Risk Risk management by individuals corporate risk management. UNIT II Risk shifting through limited liability Liability for actions of employees and other parties products liability Environmental liability Directors and Officers liability. UNIT III Instruments of External Techniques for Risk Management viz Forwards, Futures, Swaps, Options, Forward Rate Agreement, Caps, Collars, Floors and their applications. UNIT IV Financial Reengineering - Innovative International Financial Products viz. Swaptions and other derivatives - Deriving new instruments for hedging UNIT V Insurance as an instrument of Risk Cover - Marine, Life, Accident, Process, Loss of Profit - Export Credit Guarantee Corporation

References: 1. 2. 3. 4. 5. 6. 7. 8. Harrington. Niehaus : Risk Management & Insurance (McGraw Hill) George E. Rajda : Principles of Risk Management & Insurance (Pearson) James Triesehmann : Risk Management & Insurance (Thomson) Dr. P.K. Gupta : Insurance & Risk Management ( Himalaya) Options and Futures Hull International Finance - A.V.Rajwade International Finance - P.G.Apte International Finance - Shapiro

Model Question Paper I 308 Risk Management and Insurance Time: 3 hours Max.,Marks: 70 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------PART A Answer the following Questions (5 X 10 = 50) All Questions carry equal marks 1. a. What is Risk? How many types of risks observed in present senior in corporate sector? Or b. Explain corporate risk management. a. What is Products liability insurance designed to do? Or b. Do environmental impairment insurance policies violate the standards of an ideally insurable exposure? 3. a. Define Forward contract? Its legal definitions, salient features and also describe its limitations? Or b. Define Options and what are the different types of options and also the different classifications of Options. a. Explain legal protections for innovative financial products and services. Or b. Explain the feature trends in financial engineering. a. What is life insurance? Explain different life insurance policies. Or b. Explain briefly about Export Credit Guarantee Corporation.

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PART B (1 X 20 = 20) 6. As the assistant treasurer of a large corporation, your job is to look for ways your company can lock in its cost of borrowing in the financial markets. The date is January 2. Your firm is taking out a loan of $25,000,000, with interest to be paid on January 2, April 2, July 2 and October 2. Your will pay the LIBOR in effect at the beginning of the interest payment period. The current LIBOR is 10 percent. You recommend that the firm buy an interest rate cap with a strike of 10 percent and a cap for an up-front payment of $70,000. Determine the cash flows with and without over the life of this loan if LIBOR turns out to be 9.75 percent on April 2, 12.375 percent on July 2, and 11.50 percent on October 2. The payoff is based on the exact number o days and a 360-day year.

Model Question Paper II 308 Risk Management and Insurance Time: 3 hours Max.,Marks: 70 ------------------------------------------------------------------------------------------------------------------------------------------------------------------------PART A Answer the following Questions (5 X 10 = 50) All Questions carry equal marks

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a. What is Risk Management? Explain Risk Management Process. Or b. Give explanation Risk Management by Individuals. a. Identify some of the major federal laws affecting employment practices. Or b. What are the responsibilities and liabilities of Directors and Officers? a. Describe the features of Futures contract and distinguish between the Forward & Future contracts? Or b. Briefly explain Caps, Collar and Floors. a. What are the recent improvements in Hedging theory? Or b. Define the concept of Swaps? What are the different types of Swaps? a. What is the difference between a specified accident policy and an open-accident policy? Explain specified accidents. Or b. Describe the loss exposures insured by different policies in marine insurance. PART B

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(1 X 20 = 20) 6. Your are a funds manager for a large bank. On December 16, your bank lends a corporation $ 15,000,000, with interest payments to be made on March 16, June 16, and September 16. The amount of interest will be determined by LIBOR at the beginning of the interest payment period. On December LIBOR is 8 percent. Your forecast is for declining interest rates, so you anticipate lower loan interest revenues. You decide to buy an interest rate floor with a strike set a 8 percent and a floor for an up-front payment of $30,000. Determine the cash flows with and without over the life of this loan if LIBOR turns out to be 8.25 percent on March 16, 7.125 percent on June 16, and 6.00 percent on September 16. The payoff is based on the exact number of days and a 360-day year.