Description
Create a simulated company that meets the following criteria:
Then discuss your plans to build a derivative management program for a firm and describe the progress you have made and any problems you have encountered.
Explanation & Answer
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Building a Derivative Management Program
Name
Institution
Date
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Stimulated company: EasyBorn
EasyBorn is a multinational financial firm that operates in the United States,
Germany, and Japan. The company has banking relationships in the three regions with loans
priced in LIBOR and Prime Rate. The company has its pension plan based in the United
States. Also, it is listed on the S&P 500 equity index and intermediate Corporate Bond Index
with a 60% and 40% respective split.
Building a derivative management program
The firm seeks to attain the objectives of maximizing the shareholder's return and
expanding its market share. The issuance of the derivatives follows a set procedure and
principles that facilitate achieving the set goals. The Board of directors will approve the risk
managers as well as the fund's investment advisor. According to U.S. Securities and
Exchange Commission (2020), there are set specifications whereby the portfolio manager
does not hold any other position in the management team. The second step will comprise the
procedure to review the derivative management program, which will occur annually.
The quantitative guideline stipulates that the firm will not extend the transaction
duration by more than a fixed amount. It will use measurable metrics and criteria to ensure
the computation of the fund ...
