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XTREME RISK GAMES (XRG)
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Market Risk Scenarios |
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A major crisis causes G-7 stock indices to post their third double-digit decline in two weeks, widening existing losses and
exacerbating market risks in a bear market. Panic is widespread. Long-only mutual funds and traditional fund managers have already received large numbers of
redemption requests, which would push asset prices down further and your asset management wing is facing calls for additional collateral.
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The Federal Reserve has reacted to a financial market crisis by reducing short-term interest rates by 100 basis points. Bond prices rose sharply.
Your firm's net bond portfolio is short. Unknown to the bank, some hidden positions were deliberately unhedged.
As a result your firm has over 80% of its trading capital in this short position, which has led to short-term liquidity needs.
Market rumours are widespread - an internal memo was leaked and market competitors are already positioned to take advantage.
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