Question 1.
a) Calculate the duration of ‘Gross Loans, bills discounted and other receivables’ of CBA for the 2020 Financial year. (For each maturity period, use the minimum maturity. For instance, assume all loans maturing between 1 and 5 years have a maturity of 1 year for this exercise)
b) Repeat (a) for the 2019 Financial Year
c) Compare part (a) and part (b). Explain changes, if any, of duration between 2019 and 2020.
d) Identify the industry lending with the longest and shortest duration (for Australia only). What are the inherent risk of such a pattern and how should this be managed?
Note to writer: for Question 1, only use financial data (i.e. figures) from Notes to the financial statements section – Notes 3.1 & 3.2 of the annual report
Question 2.
a) Estimate CBA’s 30-day Total market risk VaR at the top 5% worst case as at June 30 2020 (only include traded market risk)
b) On page 228 of Notes 9.3 (Notes to the financial statements section), the last table provides two types of VaRs for the 2020 Financial Year. One year is the average VaR for the period ended at 30 June 2020. The other is the VaR as at 30 June 2020. The difference captures the current market risk as at 30 June 2020 versus the average risk in the past whole year. Compare the traded market risk VaRs for average June 2020 and as at June 2020. Discuss the changes in the following market conditions: (1) interest rate risk (2) Forex risk, and (3) Credit risk
c) Read through page 229 of Non-traded market risk section and explain why the interest rate risk for the 2020 financial year is higher than the interest rate risk for the 2019 financial year.
Note to writer: For Question 3, only use financial data (i.e. figures) from Notes to the financial statements – Note 9.3
Supporting qualitative information and evidence for these questions can be taken from any part of the annual report and any credible external sources, however, the numerical figures have to be retrieved from the abovementioned specific Note sections.
