Extreme Events – Specimen Question A.8.3

[this page | pdf | references | back links]

Return to Question and Answer Summary

You are a financial services entity operating in a regulated environment in which your capital requirements are defined by a nested stress test approach as described in Section 8.3.3. Your investment manager has approached you with a new service which will involve the manager explicitly optimising your investment strategy to minimise your regulatory capital requirements and is proposing that you pay them a performance related fee if they can reduce your capital requirements. Set out the main advantages and disadvantages (to you) of such a strategy.

Answer/Hints

NAVIGATION LINKS
Contents | Prev | Next | Chapter Questions