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MF0016 —Treasury Management

MF0016 —Treasury Management

Summer 2013

Master of Business Administration – MBA Semester 4

MF 0016 —Treasury Management— 4 Credits

(Book ID: B1311)

Assignment- 60 marks

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.


Q1. Consider yourself as a chief financial officer, describe the treasury functions that you handle and discuss how you will formulate the treasury policy.

Answer : The CFO’s job is a very complex one. We have only scratched the surface of the many things this executive is responsible for. One thing is certain: a great CFO will usually differ from a good CFO by the way that he or she is able to project the long-term financial picture of the company and by how the company thrives based on his or her analyses. If i am at the position of CFO i will have responsibility towards maintenance of the treasury and there will be a



Q2. The NCDEX trading system provides a fully automated screen based trading for futures commodities on basis of nationwide online monitoring and surveillance mechanism. Discuss explain the concept of commodity market, role of regulator and players.

Answer : Concept of commodity market :

Commodity market refers to physical or virtual transactions of buying and selling involving raw or primary commodities. A soft commodity generally refers to commodities harvested as products like wheat, coffee, cocoa, sugar, corn, wheat, soybean, and fruit traded in the commodity market. Hard commodities usually refer to commodities that are extracted




Q3. Consider yourself as a CEO of an automobile company in India, Which tool will you adopt to minimize risk occurring in the production process.

Answer : Risk management :

Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives, whether positive or negative) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Risks can come from uncertainty in financial markets, project failures (at any phase in design,



Q4. Suppose you are the CEO of MS Bank Corporation. Your bank is facing interest rate risk, which has affected its operation significantly. Discuss the factors that influence the level of market interest rate.

Answer : Interest rate risk :

Interest rate risk is the risk that arises for bond owners from fluctuating interest rates. How much interest rate risk a bond has depends on how sensitive its price is to interest rate changes in the market. The sensitivity depends on two things, the bond’s time to maturity, and the coupon rate of the bond. Interest rate risk analysis is almost always based on simulating movements in one or more yield curves using the Heath-Jarrow-Morton framework to ensure that the yield curve movements are both consistent with current market yield curves and such that no riskless arbitrage



Q5. The treasury maintains the bank funds, it automatically surrounds liquidity and interest rate risks. Discuss the relationship between treasury and ALM

Answer : Treasury :

A treasury is either a government department related to finance and taxation or a  place where currency or precious items (gold, diamonds, etc.) is/are kept. The head of a treasury is typically known as a treasurer. This position may not necessarily have the final control over the actions of the treasury, particularly if they are not an elected representative. The primary functions of a treasury department at a bank involve asset/liability management. A substantial amount of time is invested by the department in forecasting net interest income (NII) and measuring the bank’s interest rate risk (IRR) or sensitivity to changes in prevailing interest rates. The statistics generated by the department are




Q6. ALM deals with strategic balance sheet management, which involves various risks, caused due to the changes in exchange rates and the position of liquidity, interest rates in the organisation. Discuss how the ALM contributes to the risks in balance sheet management.

Answer : ALM :

Asset-liability management (ALM) is a term whose meaning has evolved. It is used in slightly different ways in different contexts. asset-liability management was pioneered by financial institutions, but corporations now also apply asset-liability management techniques. This article describes asset-liability management as a general concept, starting with more traditional usage.

Traditionally, banks and insurance


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