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Pages:
4 pages/β‰ˆ1100 words
Sources:
Check Instructions
Style:
Harvard
Subject:
Accounting, Finance, SPSS
Type:
Coursework
Language:
English (U.K.)
Document:
MS Word
Date:
Total cost:
$ 22.46
Topic:

Data Risk Analysis of Hargreaves Lansdown PLC

Coursework Instructions:

The assignment is an individual report on risk analysis of HARGREAVES LANSDOWN PLC. You are required to write a risk report on a specific company for an institutional investor who has £120,000 to invest. You are working for the investor so the report should be neutrally worded. This is not a sales report where your aim is to persuade the investor to take a position. Instead, it is an honest evaluation of risk to enable the investor to make the correct decision for themselves. You are not required to provide a recommendation. The aim of the investor is to make a positive return from their capital, therefore, you should attempt to identify risks that will affect the company and might lead to a reduction in share price. You should also, where appropriate, use numerical techniques to quantify the risks of the investment.
Required:
1. You are free to arrange the report in any way you like, however, the first page must contain a title (containing the Company name) and an Executive Summary (no more than 200 words) describing your key findings.
(Marks allocated: 10% - no more than 200 words)
2. Estimate the Market Risk Capital Charge under Basel II and Basel II.5 for the institutional investor if they invested in the company. You are required to use both variance-covariance and historical simulation method to estimate the market risk capital charge (collecting the historical closing price for the company for one to four years). You should also compare the results from and pros and cons of the chosen variance-covariance and historical simulation methods.
(Marks allocated: 35%)
3. There are a range of risks which may affect the company and you should attempt to identify and describe the specific risks. Depending on the firm these may include: market risk, risks to the sector*, foreign exchange rate risk*, credit risk*, operational risk* and others. (* note numerical analysis is not required for these risks due to difficulty of obtaining data)
(Marks allocated: 35%)
4. For the risks analysed above, address if any of these risks may easily be reduced by the institutional investor. Estimate the worst case scenarios for the investor using quantitative analysis. In particular, if the investment goes badly, how much they are likely to lose. In doing this you should present your calculations and justify your approach.
(Marks allocated: 20%)
Format of Coursework:
1. An electronic copy of your assignment, which is properly labelled with your Company name (anonymous marking, do not put your name), should be submitted via the module blackboard site.
2. An Excel spreadsheet (labelled with your Company name), containing stock data and all calculations where necessary should be submitted via the module blackboard site.
3. You must include your student number, module title and report title on the first page (Cover Page) of your report. The report is 1000 words (±10%) excluding appendices, with size 12 font and 1.5 line spacing for the main text.
4. List of References should be included if any materials were cited in the report, following the Westminster Harvard Referencing Style. Appendices may be used where necessary to include relevant definitions or data.
You are expected to make full use of all the facilities offered by the University libraries and other sources. Examples of other sources of information include the Financial Times, the Economist, Investors’ Chronicle, Fame database, Bloomberg, DataStream, Excel cards and databases.Assignment Outline:
The assignment is an individual report on risk analysis of a specific company. You are required to write a risk report on a specific company for an institutional investor who has £120,000 to invest. You are working for the investor so the report should be neutrally worded. This is not a sales report where your aim is to persuade the investor to take a position. Instead it is an honest evaluation of risk to enable the investor to make the correct decision for themselves. You are not required to provide a recommendation. The aim of the investor is to make a positive return from their capital, therefore, you should attempt to identify risks which will affect the company and might lead to a reduction in share price. You should also, where appropriate, use numerical techniques to quantify the risks of the investment.
Required:
1. You are free to arrange the report in any way you like, however, the first page must contain a title (containing the Company name) and an Executive Summary (no more than 200 words) describing your key findings.
(Marks allocated: 10% - no more than 200 words)
2. Estimate the Market Risk Capital Charge under Basel II and Basel II.5 for the institutional investor if they invested in the company. You are required to use both variance-covariance and historical simulation method to estimate the market risk capital charge (collecting the historical closing price for the company for one to four years). You should also compare the results from and pros and cons of the chosen variance-covariance and historical simulation methods.
(Marks allocated: 35%)
3. There are a range of risks which may affect the company and you should attempt to identify and describe the specific risks. Depending on the firm these may include: market risk, risks to the sector*, foreign exchange rate risk*, credit risk*, operational risk* and others. (* note numerical analysis is not required for these risks due to difficulty of obtaining data)
(Marks allocated: 35%)
4. For the risks analysed above, address if any of these risks may easily be reduced by the institutional investor. Estimate the worst case scenarios for the investor using quantitative analysis. In particular, if the investment goes badly, how much they are likely to lose. In doing this you should present your calculations and justify your approach.
(Marks allocated: 20%)
Format of Coursework:
1. An electronic copy of your assignment, which is properly labelled with your Company name (anonymous marking, do not put your name), should be submitted via the module blackboard site.
2. An Excel spreadsheet (labelled with your Company name), containing stock data and all calculations where necessary should be submitted via the module blackboard site.
3. You must include your student number, module title and report title on the first page (Cover Page) of your report. The report is 1000 words (±10%) excluding appendices, with size 12 font and 1.5 line spacing for the main text.
4. List of References should be included if any materials were cited in the report, following the Westminster Harvard Referencing Style. Appendices may be used where necessary to include relevant definitions or data.
You are expected to make full use of all the facilities offered by the University libraries and other sources. Examples of other sources of information include the Financial Times, the Economist, Investors’ Chronicle, Fame database, Bloomberg, DataStream, Excel cards and databases.

Coursework Sample Content Preview:

RISK ANALYSIS - HARGREAVES LANSDOWN PLC
Student’s Name
Course
Professor’s Name
University
City (State)
Date Risk Analysis - Hargreaves Lansdown Plc.
Introduction
To assist in your deliberation to invest the £120,000 in the above company, we assess its speculative risk. This assessment will enhance your decision making. The following discussion will look at the risks that are inherent in the type of company that you are intending to place your investment in. In our evaluation, we shall estimate the risk through quantitative, as well as qualitative analysis and in the end try to point out any of the risks that you may remedy. In addition, we shall also measure, by use of quantitative techniques, the worst-case scenarios that you may face in the process. Note that the above will apply if you make the decision to invest. However, there is the opportunity cost of choosing not to invest.
Market Risk Capital Charge
Attached is an excel spreadsheet, with estimates of the Basel II and Basel II.5 market risk capital charge based on the stock prices. We have applied both the historical simulation and the variance-covariance techniques in the quantitative estimation of the risk of investing in Hargreaves Lansdown Plc. The data is collected between November 11, 2019, and November 02, 2021 from Yahoo Finance, representing the daily stock prices. The historical simulation method yields a Market Risk Capital Charge of £31,194 and £77,984 for Basel II and Basel II.5, respectively, whereas the variance-covariance approach gives us a Market Risk Capital Charge of £22,931 and £57,327 for Basel II and Basel II.5, respectively.
Comparisons, pros, and cons of estimation techniquess. The variance-covariance approach yields a lower Market Risk Capital Charge of £22,931 and £57,327, under Basel II and and Basel II.5, respectively, compared to the historical simulation’s values of £31,194, and £77,984, under Basel II and and Basel II.5, respectively. As a non-parametric method, The historical simulation approach is a non-parametric measure which is advantageous since its analysis is not dependent on the assumed linear relation of the parametric methods. The historical simulation result is of higher accuracy in contrast to the other approaches.
On the flipside, the historical simulation method could generate inaccurate results because the data it uses may be stale due to the volatilities in the stock market as a result of advancements in technology and changed market perceptions. Given the volatile market conditions, the values used to assign the weight to the observations in the historical simulation method may change easily leading to the invalidation of this technique’s result. Each historical observation carries the same weight in HS forecasting. This can be a disadvantage, particularly when there is a structural break in volatility (Danielsson, 2011: 95). Businesses normally operate in quite volatile markets.
The variance-covariance approach assumes a normal data distribution and as such it is simple to use. It assumes that, for exampl...
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