Prelim- Risk Mangement
Q1. Solve any 2 (15 marks)
- Explain the risk management process
- Explain the diversification and investment process for risk avoidance
- Based on the following information, calculated the weighted beta and using the CAPM model advise on the strategy per company
| Company | No if shares | Beta | MPS | Expected return |
| A | 50000 | 1.2 | 12 | 19% |
| B | 10000 | 1.4 | 20 | 20% |
| C | 5000 | 0.9 | 55 | 18% |
| D | 20000 | 1.3 | 22 | 12% |
Q2. Solve any 2(15 marks)
-  An Indian company imports in dollars and the payment is due in 3 months. The invoice amount is $13750 and today’s spot rate is 1INR= 0.0275$ which is equivalent to Rs 5 lakhs. It may happen that the exchange rate may decline by 5% over 3 months. A 3 month forward contact is available for 0.0273$. How can you reduce the forex risk in this case.
- Explain the Markowitz and Arbitrage theory of risk mitigation
- Explain the ERM Matrix
Q 3. Solve any 2( 15 marks)
- Explain the 3 line of defence model
- What is Assurance and why is it needed
- Who are the various stakeholders and how do they assure that risk are mitigated.
Q4. Solve any 2( 15 marks)
- Elaborate the role on actuary in the risk management for insurance
- Concepts:- Reinsurance, Bankassurance, Alternative Risk Transfer
- Explain the general insurance claim management process
Q5. A. A table depicting various types of insured and their age along with sum assured and their class category is given. Calculate the tentative expected claim cost (5 marks)
| Gender | Age | Sum Insured | Base rate | Risk class(%) |
| Male | 45 | 100000 | 2.5 | 125% |
| Male | 50 | 200000 | 2.75 | 150% |
| Male | 58 | 300000 | 1.56 | 200% |
| Female | 60 | 150000 | 3.01 | 100% |
| Male | 35 | 150000 | 1.4 | 100%
|
B Expected loss are as follows (5 marks)
Loss values (Rs)Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Probability
100000Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.02
20000Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 0.08
Find fair premium if policy provides full coverage, underwrtting cost is 30% of pure premium, claim are paid at the end of the year, interest rate is 9%, processing cost is Rs 750/- and fair profit is 10% of pure premium
c. Explain the various ways to hedge FOREX exposures. (5 marks)
Hi BMS
hello sir, please mention the values for current market return and Risk free rate for below metioned sum of prelim paper
Q1 /3 )Based on the following information, calculated the weighted beta and using the CAPM model advise on the strategy per company
Company No if shares Beta MPS Expected return
A 50000 1.2 12 19%
B 10000 1.4 20 20%
C 5000 0.9 55 18%
D 20000 1.3 22 12%
What is the solution for expected claim cost plz provide fast