Short Answer Questions

1. What are the causes of financial risks?

Answer:-Incompleteness and asymmetry of information.

-Competition among financial institutions is becoming increasingly fierce.

-The fragility of the financial system has increased.

-Financial innovation makes financial supervision more difficult.

-The operating environment of financial institutions is flawed.

-The internal control system of financial institutions is not perfect.

-Due to the economic system.

-Financial speculation.

-Other reasons: ① the transfer of international financial risks; (2) deterioration of financial ecological environment; ③ Relax effective financial supervision.

2. What is the meaning of information asymmetry? What are the adverse selection and moral hazard caused by information asymmetry?

A: Information asymmetry means that information is owned by some participants but not others. Information asymmetry has two meanings:

(1) The distribution of transaction information between the two parties is asymmetric. For example, in the relationship between banks and enterprises, enterprises are more aware of their own operating conditions, prospects and solvency than banks;

(2) The party at an information disadvantage lacks relevant information, but can know the probability distribution of relevant information.

Adverse selection and moral hazard caused by information asymmetry;

(1) Adverse selection: It means that in the loan market, as a loan bank, the loan interest rate can only be determined according to the average risk level of the investment project due to the asymmetric information of both borrowers and borrowers. In this way, those projects with lower risk than average will withdraw from the lending market because of the generally low rate of return, and the remaining projects willing to pay higher interest rates are generally projects with higher risk than average. The final result is that the average risk level of bank loans increases, while the average income decreases and bad debts increase.

(2) Moral hazard: refers to the fact that after a contract is concluded, because one party lacks the information of the other party, the party with information may take advantage of the information to engage in behaviors that maximize its own interests and harm the interests of the other party. Under the background of financial liberalization and deregulation, enterprises may take advantage of the information about projects and the fact that bank supervision is relaxed, change the purpose of loans or make false accounts to transfer profits, and evade bank debts through bankruptcy and joint ventures.

3. How to classify the five categories of loans?

A: There are five categories: normal, concerned, minor, suspicious and loss. The latter three are non-performing loans.

Normal means that the borrower can perform the contract and there is no sufficient reason to suspect that he can't repay the loan principal and interest on time.

Concern means that although the borrower has the ability to repay the loan principal and interest at present, there are some factors that may adversely affect the repayment.

Subgrade means that the borrower's repayment ability has obvious problems, and it can't repay the loan principal and interest completely by relying on its normal operating income. Even if the guarantee is implemented, it may cause certain losses.

Suspicious means that the borrower can't repay the loan principal and interest in full, even if the guarantee is implemented, it will definitely cause great losses.

Loss means that after taking all possible measures or all necessary legal procedures, the principal and interest are still unrecoverable, or only a small part can be recovered.

Thesis problem

1. What are the strategies for financial risk management?

A: Financial risk management strategies include:

1. Avoidance strategy. Risk aversion is a kind of pre-control, which means that decision makers voluntarily give up or refuse to admit risks in consideration of their existence. This is a conservative risk control method, which avoids the loss of risk and also means giving up the opportunity of risk return.

2. Prevention strategy. It refers to preventing risks. By analyzing the conditions and causes of risk accidents, financial institutions try their best to present the conditions of accidents, so as to minimize the possibility of risk accidents until they are completely eliminated.

3. Suppression strategy. Also known as reduction strategy, it means that financial institutions take various active measures to reduce the possibility and damage degree of risks, which is often used for credit lending.

4. Decentralization strategy. It means that managers take risks of different natures and use seven correlation degrees to obtain the portfolio with the greatest risk, so that the overall risk level after summation is the lowest. The risk diversification strategies of commercial banks are generally divided into two types: random diversification and effective diversification.

5. Transfer strategy. It is also an ex ante control strategy, which records possible risks before they occur and transfers them to others through various trading activities.

6. Compensation strategy: firstly, the risk reward is included in the price, that is, in addition to the general investment yield and currency depreciation factors, the risk compensation factor is added.

7. Risk supervision. Throughout the whole risk management process, including external supervision and internal monitoring.

The second task

Short Answer Questions

1. What is liquidity risk? What are the main reasons for liquidity risk?

Liquidity risk refers to the possibility that customers' liquidity needs cannot be met in time without increasing costs or losing asset value.

Reason:

(1) The term structure of assets and liabilities does not match.

(2) The quality structure of assets and liabilities is unreasonable. High-quality assets will have good liquidity; The liabilities of financial institutions are of high quality, such as negotiable certificates of deposit, which holders can transfer in the secondary market without going to the issuing bank to realize, so the cash pressure of banks is small.

(3) Poor management. Poor management, short-term recovery of long-term loans, demand deposits can not be withdrawn at any time, will weaken liquidity.

(4) Changes in interest rates. When the market interest rate rises, some customers will withdraw their deposits or recover their claims; Loan customers will choose to postpone the loan.

(5) The reasons of monetary policy and financial market. When the central bank adopts a tight monetary policy, the amount of money and credit will decrease and the liquidity risk will increase.

(6) Credit risk.

2. What are interest-sensitive assets and interest-sensitive liabilities? What is the impact of interest rate changes on bank profits when the scale is different?

A: Interest-sensitive assets and interest-sensitive liabilities refer to assets or liabilities whose income or cost is greatly affected by interest rate fluctuations.

When interest-sensitive liabilities are greater than interest-sensitive assets, lower interest rates will increase bank profits, while higher interest rates will reduce profits.

When interest-sensitive liabilities are less than interest-sensitive assets, interest rate increases will increase bank profits, while interest rate decreases will reduce profits.

3. What is foreign exchange risk? What is an open foreign exchange position?

A: Foreign exchange risk, also known as exchange rate risk, refers to the possibility that economic entities will suffer economic losses due to exchange rate changes when holding or using foreign exchange.

Foreign exchange exposure positions include:

(1) In foreign exchange trading, the risk position is characterized by overbought (i.e. long position) or oversold (short position) of foreign exchange.

(2) In business operation, the risk position shows the mismatch between foreign currency assets and liabilities, such as the foreign currency assets are larger or smaller.

Liabilities, or the amount of foreign currency assets and liabilities is equal, but the term is inconsistent.

Thesis problem

The main content of liquidity risk management theory.

Liquidity risk management theory includes "commercial loan theory", "liability management theory" and "asset-liability management theory".

1. On Commercial Loans:

(1) The basic content of commercial loan theory. According to the theory of commercial loans, the main source of funds for commercial banks is absorbed demand deposits, and commercial banks only issue short-term self-compensating loans related to commodity turnover or suitable for production materials reserves, that is, short-term working capital loans. Because this kind of loan can be repaid from sales income with the completion of commodity turnover and production and marketing process. This theory holds that commercial banks should not issue long-term loans and consumer loans, and even if they need to, the amount should be strictly limited to the scope of free capital and savings deposits of banks. At the same time, the theory emphasizes that short-term loans must be based on real commodity transactions and secured by real commodity bills. In this way, when the enterprise can't repay the loan, the bank can deal with the collateral to ensure the safety of the funds. Therefore, people also call it "real bill theory". ? At that time, the development of commodity production and commodity exchange was very low Most of the operating funds of general enterprises come from their own funds, and only when there is a seasonal or temporary shortage of funds will they apply for loans from banks. In addition, people didn't have the habit of borrowing and spending at that time. If consumer loans were issued, there might be no market. Moreover, the main source of bank funds at that time was demand deposits, and there were not many time deposits. The high liquidity of capital sources requires the high liquidity of capital utilization. (2) Evaluation of commercial loan theory. Commercial loan theory is a typical asset management theory, which has long dominated the business activities of commercial banks and has certain positive significance for maintaining bank liquidity.

(1) found the basis and methods to maintain the liquidity and security of banks, thus avoiding or reducing the risks caused by insufficient liquidity or security.

② It can meet the demand of commodity trading for bank credit funds. Because this theory emphasizes that bank loans are based on real commodity transactions, when social production expands and commodity transactions increase, bank credit will automatically follow; When production shrinks and commodity transactions decrease, credit will automatically shrink. This will neither cause inflation nor deflation. Because of this, commercial banks all over the world have followed this theory for a long time.

2. Debt Management Theory:

(1) The basic content of debt management theory. In the past, when people considered the liquidity of commercial banks, they all paid attention to the asset side, that is, by adjusting the asset structure, they converted one asset with low liquidity into another asset with high liquidity. Debt management theory holds that the liquidity of banks can be obtained not only by strengthening asset management, but also by debt management. In short, borrowing money from outside can also provide liquidity. As long as the bank's loan market is broad, its liquidity will be guaranteed to a certain extent. The asset side does not need to maintain a large number of highly liquid assets, but funds can be invested in high-profit loans and investments.

(2) Evaluation of debt management theory. The most important significance of debt management theory lies in finding a new way for commercial banks to maintain liquidity; At the same time, it also makes commercial banks more enterprising and adventurous, because it is based on the confidence of absorbing funds. However, from another perspective, this business strategy not only increases the bank's debt cost, but also increases the bank's operational risk, resulting in a smaller proportion of the bank's own capital, and the problem of "borrowing short and releasing long" is becoming more and more serious.

3. "Asset-liability management theory":

According to this theory, it is difficult for commercial banks to balance safety, liquidity and profitability only by asset management or liability management. Only through the adjustment of asset structure and liability structure and the unified management of assets and liabilities can the unity of the three be realized. If the source of funds is greater than the purpose of funds, we should try our best to expand the scale of asset business or adjust the asset structure; On the contrary, if the source of funds is less than the purpose of funds, we must try to find new sources of funds. The theory holds that the foundation of management is the liquidity of funds; The goal of management is to maximize profits when the market interest rate changes frequently; The principles to be followed are: scale symmetry, structure symmetry, speed symmetry, complementary goals and scattered assets.

The third job

Short Answer Questions

1. What does the insurance business risk of an insurance company mean? What risks does it mainly include? What are their performances?

Answer: 1. Insurance business risk refers to the possible deviation between the business target and the actual business result in the operation process of an insurance company, that is, the possible economic loss or uncertainty.

2. Insurance business risks mainly include insurance product risks, underwriting risks and claims risks. Their respective performances are:

(1) Main manifestations of insurance product risks

–This risk includes product design risk and display risk based on product design.

(2) the main performance of underwriting risk

–Ignoring the risk liability control, increasing the retention amount, lowering the rate, relaxing the underwriting conditions and making a high refund without authorization;

–Coverage underwriting

(3) the main performance of claim risk

–Internal claim risk

–Risk of external insurance fraud

–At your own risk: amortize the loss directly into the cost or write down the capital.

Self-insurance risk: compensate the loss of non-performing loans by establishing non-performing loan reserves.

2. What are the three traditional businesses of China Securities Company and their significance?

Investment banking, economic business and proprietary business are the three traditional businesses of China's securities companies, and they are also the main sources of income for securities companies.

Investment banking is to assist the government or industrial and commercial enterprises to sell newly issued securities, provide financial consultants for enterprises, and help enterprises restructure their assets.

Economic business is to buy and sell issued securities for customers, that is, economic business is the behavior of ordinary investors entrusting securities companies to buy and sell securities.

Proprietary business is the behavior of securities companies to obtain investment income by buying and selling securities in their own accounts.

3. The main risks of rural credit cooperatives and their significance.

A: Credit risk. Also known as default risk, it means that the debtor of the credit union cannot repay or postpone the repayment of the loan principal and interest, resulting in bad debts and losses to the credit union.

Liquidity risk. Mainly refers to the possibility that credit cooperatives do not have enough funds to pay off debts and meet the needs of customers to withdraw deposits, and have to sell assets at a loss to obtain cash, which may cause economic losses to credit cooperatives.

Interest rate risk. Refers to the loss caused by the change of market interest rate, which leads to the change of debt cost and asset income of credit cooperatives.

Operational risk. It refers to the risk that the assets or profits of the credit union will be reduced due to problems or mistakes in the internal control mechanism of the credit union, or operational mistakes caused by the staff intentionally or negligently, and may cause losses to customers.

Capital risk. Capital risk refers to the possibility of bankruptcy of credit cooperatives. From a technical point of view, when the net income or shareholders' equity of credit cooperatives is negative, credit cooperatives lack solvency.

Thesis problem

Countermeasures and measures for risk management of intermediate business in commercial banks.

1 Classification and risk characteristics of intermediary business of commercial banks.

1. Settlement of intermediary business

–refers to the businesses related to currency receipt and payment handled by commercial banks for customers, including settlement and sale of foreign exchange, foreign currency exchange, credit card and other businesses.

–This business risk comes from human error, poor communication, unauthorized, poor supervision or system failure, resulting in losses to customers or banks.

2. Financing intermediary business

–refers to the related businesses caused by commercial banks providing financing other than traditional credit to customers, including bill discount, export bill negotiation, financial leasing, etc.

The source of risk in this kind of business is the authenticity of bills.

3. Acting as an intermediary business

All kinds of receipts and payments, issuance, trading, underwriting and payment of government, financial and corporate bonds, buying and selling foreign exchange on behalf of customers, and acting as an insurance agent.

–The risks of such businesses focus on operational risks, and the risks are relatively small.

4. Service intermediary business

–refers to commercial banks providing pure services to customers by using existing institutional networks and business functions, including providing market information, enterprise management consulting, project asset evaluation, enterprise credit rating, etc.

–The risks of such businesses are also concentrated on operational risks, and the risks are relatively small.

5. Guarantee intermediary business

Intermediary business of guarantee refers to the related business caused by commercial banks selling credit to customers or taking risks for customers, including guarantee, promise, acceptance, letter of credit, etc.

This kind of business, also known as contingent assets and contingent liabilities, is characterized by banks relying on credit, not occupying funds, and being in the position of the second debtor. In addition to liquidity risk, all kinds of risks exist, and the risk is greater.

6. Derived intermediary business

–refers to the business that commercial banks engage in various transactions related to derivative financial instruments, including financial futures, options, forward interest rate agreements, swaps, etc.

This kind of business is risky.

2. Countermeasures and measures for intermediate business risk management of commercial banks.

Countermeasures for risk management of intermediate business of commercial banks include:

-Deepening the supervision of intermediary business risks by regulatory authorities.

-Strengthening the internal basic management of intermediate business risks.

-Improve the risk management system of intermediary business.

-Optimize the customer structure and reasonably determine the scope of intermediate business.

The fourth task

Short Answer Questions

1. What are the types and meanings of financial derivatives?

Forward: one of the simplest financial derivatives refers to the agreement between buyers and sellers to buy or sell an asset at a certain price in a certain period in the future. Forward financial derivatives are a series of derivatives that are changed and synthesized with forward instruments as the core, including commodity forward transactions, forward foreign exchange transactions, forward interest rate agreements and so on. Forward contracts and futures contracts are both forms of transactions in which both parties agree to buy and sell a certain amount and quality of assets at a certain price at a certain time in the future. However, futures contracts are standardized contracts designated by futures exchanges, which uniformly stipulate the expiration date of contracts and the types, quantity and quality of assets to be bought and sold, while forward contracts are contracts signed by buyers and sellers according to their own special needs.

-Futures: In fact, it is a standardized forward delivery contract designed and launched by the exchange and traded centrally on the exchange. Compared with forward contracts, its biggest feature is that the contents contained in each contract are standardized. Financial derivatives of futures are a series of derivatives synthesized with futures instruments as the core, including commodity futures, foreign exchange futures, interest rate futures and stock index futures.

Option: In a certain period of time in the future, buying and selling financial instruments at an agreed price is a right rather than an obligation. There is a right to buy and a right to sell. Call option (put option) refers to the right to buy (sell) a standard unit asset at an agreed price in the agreed future time. The buyer in the option contract must pay a certain price to obtain this right, that is, the price of the option. There are European options and American options. European options can only be exercised on the expiration date, while American options can be exercised any day before the expiration of the contract. Option-based financial derivatives are a series of derivatives with option tools as the core, including commodity options, foreign exchange options, interest rate options, stock options and stock index options.

Swap: refers to the financial activities in which two parties sign contracts and exchange a series of payments with each other within a certain period of time. Swapping financial derivatives is a contract signed by both parties to exchange certain assets in a certain period in the future, more precisely, it is a contract signed by both parties to exchange cash flows with equal economic value in a certain period in the future. Interest rate swap and currency swap are more common.

2. What is the principle of time value of money?

The time value of money (TVM) means that a certain amount of money currently held is more valuable than the equivalent money obtained in the future.

This is because: money can be used to invest and earn interest, so there will be more money in the future; The purchasing power of money will change with time due to the influence of inflation; Generally speaking, the expected return in the future is uncertain.

3. What are the main contents of the risk management methods of online banking?

The rapid development of technological innovation has changed the characteristics and scope of risks faced by banks' online banking business, and increased the difficulty of bank risk management.

In the field of online banking, the most common and popular is the risk management steps formulated by the Basel Committee. The Basel Committee divides the risk management of online banking into three steps: risk assessment, risk control and risk monitoring.

(1) Risk assessment: It usually includes the following three steps: identify risks and determine the risk tolerance of banks; Determine whether the risk exposure is within the tolerance of the bank. In fact, it is the process of risk identification, including risk identification and risk quantification.

(2) Managing risks: The essence of managing risks is to design various corresponding control measures and systems for risks, so as to reduce risks and eliminate losses. Risk management procedures should include the following contents: implementing safety policies and safety measures; Evaluation and upgrade of the system; Take measures to control and manage the outsourcing business; Information disclosure and customer training; Make an emergency plan.

(3) Monitoring risks: System testing and auditing are two elements.

Thesis problem

On the construction of China's financial risk prevention system.

1. Establishing a financial risk assessment system, that is, identifying risks, measuring risks, preventing risks and resolving risks, all depend on risk assessment, which is the premise and basis for risk assessors to prevent financial risks. The following work needs to be done well: (1) Improve the scientific financial early warning index system. (2) Develop financial risk assessment model.

2. Establish an early warning information system. (1) indicators describing the overall financial risks of the market and the risks of financial institutions have been added to provide information support for risk monitoring and early warning. (2) Strictly improve the financial statement system of financial institutions, and stipulate strict data collection contents, formats, methods and collection channels.

3. Establish a good corporate governance structure. (1) Improve the decentralization structure of state-owned commercial banks. (2) Improve the organizational structure of corporate governance. (3) Improve the incentive mechanism and restraint mechanism. (4) Strengthen information disclosure and transparency.

4. Strengthen the construction of prudential supervision system. (1) Construct the regulatory organization of the regulatory agency. (2) Improve the internal control system of China's financial institutions. (3) Establish a self-regulatory mechanism for the financial industry. (4) Give full play to the supervisory role of social intermediary.