IMP CASE STUDIES
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Bank Financial Management — CAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
A bank holds a bond portfolio with modified duration of 5 years and the interest rate rises by 100 bps — what is the approximate percentage fall in portfolio value?
The portfolio value falls by approximately 5% (Modified Duration × Change in yield = 5 × 1% = 5%).
In a treasury case study, if a bank's investment portfolio duration is 4 years and yield rises by 150 bps, what is the approximate price decline?
Approximately 6% decline in portfolio value.
If a bank's treasury buys a USD/INR forward at 83.50 for 3 months and the spot rate at maturity is 84.20, what is the gain or loss per USD?
The bank gains INR 0.70 per USD (84.20 − 83.50), as it locked in a lower forward rate and the rupee depreciated more than expected.
A bank enters a forward rate agreement (FRA) to borrow INR 100 crore at 7% for 3 months — if market rate rises to 7.5%, who gains?
The bank gains from the FRA settlement.
A bank has a positive gap (Rate Sensitive Assets > Rate Sensitive Liabilities) of INR 500 crore — how does a 50 bps rate rise affect its Net Interest Income?
NII increases by approximately INR 2.5 crore (INR 500 crore × 0.50%), because assets reprice faster than liabilities in a rising rate environment.
In a case study on liquidity risk, a bank faces a sudden INR 2,000 crore deposit withdrawal — which liquidity buffer is used first?
High Quality Liquid Assets (HQLA) buffer is used first.
In a case where a bank's VaR at 99% confidence for one day is INR 10 crore, what does this mean operationally?
It means the bank expects losses to exceed INR 10 crore on only 1% of trading days, i.e., approximately 2–3 days per year under normal market conditions.
A bank's treasury sells a 6-month USD forward at 84.00 and hedges it by buying spot USD at 83.50 — what is the approximate forward premium earned?
Forward premium earned is approximately 50 paise per USD.
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