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Futures and Options Market - Term Paper Example

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Reckless bank being one of the victims affected by these drastic change they resulted in a reckless risk taking without considering the consequences it attracted to…
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Futures and Options Market
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Download file to see previous pages In financial reporting, VAR is considered one of the major three methods used and as well recommend by the FRR. The method plays a major role in ensuring they give the most likely the institution is likely to suffer when operated under normal market movements. The rule of disclosing markets risks requires that the method must gauge the level of risk they are exposed to and make sure their investors can make their judgement in regards to the same facts. In a real sense, it should be a faithful model of letting them know what is happening on the ground. The FRR requires the investors the make demands of hefty compensation if they learn it after the risks have taken place (JORION, 2001).
By testing, it’s revealed that the relationship between the cost of capital and VAR are positive. The results obtained are of great facts. This is even after they have taken care of various characteristics of the firms operating in that market. The relationship between the cost of equity and VAR shows that, it’s an effective measure which can be used to determine the value investors are likely to make for being exposed to the market risks. Moreover, am looking to determine whether, VAR is also accounted for in the determination of the cost of equity. I have achieved this by involving measures of complicated elements of the banks.
On the other hand, the report is more effective to Reckless bank PLC whose management are thinking of taking value-at-risk in order to boost their stakeholders value. This means they will be able to make their decisions on the basis of the results they have obtained from various correlation and simulation models. Then realization of the fact that stock markets are affected by the VAR reported in terms of the results reported in an economical perspective, it brings the need to look at these results more keenly and avoid the losses which are associated with it (PENZA & BANSAL, 2001). The ...Download file to see next pagesRead More
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