ENTERPRISE RISK MANAGEMENT

ASSIGNMENT On Interpretation of VAR and Option pricing strategies

SUBMITTED BY PALLAV GOYAL 10335 BATCH- XVIII

VIGNANA JYOTHI INSTITUTE IN MANAGEMENT BACHUPALLY, HYDERABAD

0487 -0. Ltd. Srei Infrastructure Finance ltd. 5.2 and Rs. .2% which is least while the VAR of Srei Infra capital is highest i.6. 11%.075 -0. with 99% confidence we can say that Rs.038 -0.056 1% -0. Shriram alone is invested the Daily value at risk comes out to be only 5.2 worth of rupees are at risk of loss. Srei infra capital and Shriram transport finance) came up to be more than the value at risk of investment. Rs. 7.098 5% -0.048 -0.100 invested in above mentioned companies i. Finaventure Capital 3.e. As per the calculation the value at risk of combination of companies (i.   With 95% confidence.090 -0. Shriram 1% Srei Infra Finaventure Shriram COMBO of (Dewan & Lic) 5% -0.0356 0. if invested alone individually in Shriram Transport Finance.052 -0.e.110 -0.0533 -0.036 -0.5 and Rs.7.0768 -0.064 -0.  If.0483 -0. 5.0560 -0.INTERPRETATION of VAR & OPTION PRICING STRATEGIES: Companies taken: (Sector: Non-Banking Finance Corporation) 1.113 -0. Srei Infra capital and Shriram Transport Finance is combined and then invested the daily value at risk comes to be at 8% where as if.075 0.e. Transport Finance Co.055 1% -0. VAR Interpretation: Companies DELTA APP HISTORICAL MONTE CARLO 2. Rs. we may say that for all the above three companies the daily value at risk are Rs.6.11.052 -0.080 As per 3 models:  VAR calculations clearly shows that for every rs. Ltd.076 -0.0521 0.028 5% -0. 3. Finaventure capital and Shriram Transport. Srei Infra capital.

. was evaluated which again resulted in higher VAR than individual investment in Finaventure alone. again a combination of Finaventure capital and Shriram Transport Finance ltd. if the investor chooses to invest alone in Shriram Transport Finance Ltd.  Likely.  A further combination of Finaventure capital & Srei Infra capital was evaluated which again resulted in higher VAR than investing individually in Finaventure Capital. we can say that the probability of earning high profit is maximum.2% rather than going for a combination. however different combination of all the companies was done and tested). Thereby. as the daily value at risk is minimum at only 5.  This further proves that no combination of above considered company would result in higher probability of earning profit than investing individually in Finaventure or Shriram Transport Finance (the calculation in the excel sheet is shown only for the combination of Srei Infra Capital and Shriram Transport Finance.

suggests that we should buy the option and exercise the option at strike price.543397 Valuation overvalued Undervalued Interpretation:  Srei Infrastructure is overvalued as per binary tree model and also as per black scholes model which clearly says we should hold the option and not exercise the call option Shriram Transport Finance is undervalued as per both the model.55444164 58.BLACK SCHOLES & BINOMIAL TREE Interpretation: (Srei Infra Capital and Shriram Transport Finance) Column1 Column2 ESTIMATED COST OF OPTION Column3 Column4 Actual cost of option 3 62 Column5 Company/Model Black Scholes Srei Infrastructure Shriram Transport Binary Tree 1.  .26409232 100.172819759 1.