Critically discuss credit rating systems, and explain how institutions and investors use them in their credit risk management

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a)Critically discuss credit rating systems, and explain how institutions and investors use them in their credit risk management.(4marks)

b)Define Value at Risk. Critically discuss the advantages and disadvantages of Value at Risk as a measure of risk.You must choose TWO companies listed on New York Stock Exchange, NASDAQ, London Stock Exchange, or the Exchange of the country where you come from, say Stock A and B. Download a minimum 61 days of price data of the two companies A and B ending February 2021. (1) What is the 99%, 5-day VaR for a 1 million pound investment in stock A? (2) What is the 99%, 5-day VaR for a 1 million dollar investment in stock B? (3)What is the 99%, 5-day VaR for a 1 million dollar investment in stock A and 1 million dollar investment in stock B? (4) What is the benefit of diversification for the 99% VaR?(12marks)

c) On 20 April 2020, the price of one American oil futures contract plunged to be negative for the first time in history. Explain the reasons behind this and critically discuss its implications on risk management and investment.(4marks)

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