Management of risk in financial services involves various strategies. The three main strategies used to manage bond portfolios are: 1) Passive or "buy and hold" strategy which involves minimal trading of bonds held to maturity. 2) Index matching or "quasi-passive" strategy which aims to replicate the performance of a bond market index. 3) Immunization or "quasi-active" strategy which aims to minimize risk from interest rate fluctuations by matching the duration of bonds held to the duration of liabilities.

1. Management of risk in financial
services
Submitted To:- Submitted By:-
Mrs. Alka Sood Dheeraj Sharma
18PBA015
MBA 4th

2. Stock Exchange
Definition:- A stock exchange, share market or bourse is a place where
people meet to buy and sell shares of company stock. Some stock exchanges
are real places (like the New York Stock Exchange), others are virtual places
(like the NASDAQ).
Meaning:- A stock exchange is an important factor in the capital market. It is
a secure place where trading is done in a systematic way. Here, the securities
are bought and sold as per well-structured rules and regulations. Securities
mentioned here includes debenture and share issued by a public company that
is correctly listed at the stock exchange, debenture and bonds issued by the
government bodies, municipal and public bodies.

3. Features of Stock Exchange
• Stock exchange is a market for second hand securities
• It is basically a market for second-hand listed securities of companies
viz., shares, debentures/ bonds and government securities.
• Stock exchange allows dealing only in listed securities. In fact, stock
exchange maintains an official list of securities that could be
purchased and sold at its floor. Unlisted securities i.e., securities which
do not figure in the official list of the stock exchange; could not be
dealt in the stock exchange.
• Stock exchange is in organized market for dealing in securities.
Activities of a stock exchange are governed by a recognized code of
conduct, apart from statutory regulations.

4. Important function of stock exchange
• Continuous market for securities
• Evaluation of securities
• Mobilizes savings
• Healthy speculation
• Mobility of funds
• Stock exchange Protect investors
• Stock exchange helps Capital formation
• Liquidity in Stock Exchange
• Control on companies

5. Mutual Fund
A mutual fund is an investment security that enables investors to pool
their money together into one professionally managed investment.
Mutual funds can invest in stocks, bonds, cash or a combination of those
assets. The underlying security types, called holdings, combine to form
one mutual fund, also called a portfolio.

6. Advantages of Mutual Fund
• Advance Portfolio Management
• Dividend Reinvestment
• Risk Reduction(Safety)
• Convenience and fair pricing

7. Disadvantages of Mutual Fund
• High Expense rations and sales charges
• Management abuse
• Tax inefficiency
• Poor trade execution

8. Merchant Banking services
“Merchant banks are the financial institutions providing specialist
services which generally include the acceptance of bills of exchange,
corporate finance, portfolio management and other banking services”.

9. Objective of Merchant Banking
⮚ Providing long term funds to the projects or companies.
⮚ Project counseling- loan syndication, project appraisal and
arrangement of Working capital.
⮚ Deciding the capital structure.
⮚ Portfolio Management
⮚ Underwriting
⮚ Corporate advisory & issue mgmt.

10. Managing of issue Share and Bonds
Top 4 Strategies for Managing a Bond
bond investing would appear to be as simple as buying the bond with the highest
yield. While this works well when shopping for a certificate of deposit (CD) at the
local bank, it's not that simple in the real world. There are multiple options available
when it comes to structuring a bond portfolio, and each strategy comes with its own
risk and reward trade offs. The four principal strategies used to manage bond
portfolios are:
Passive, or "buy and hold"
Index matching, or "quasi-passive"
Immunization, or "quasi-active"
Dedicated and active

11. Issue of Share
A rights issue is one of the ways by which a company can raise equity
share capital among the various types of equity share capital sources
available. These are slightly different from the standard issue of shares.
Right shares mean the shares where the existing shareholders have the
first right to subscribe the shares.

12. Credit Rating
Introduction
A credit rating is a quantified assessment of the creditworthiness of a
borrower in general terms or with respect to a particular debt or
financial obligation. A credit rating can be assigned to any entity that
seeks to borrow money—an individual, corporation, state or provincial
authority, or sovereign government.

13. Regulatory frame work of credit rating
RBI guidelines:-
A Non banking financial corporation (NBFC) must have minimum
investment grade credit rating if it intended to accept public deposit.
Unrated or underated NBFCs in the category of equipment leasing and
hire purchase finance companies are required to disclose the fact of their
being underated, to the public , if they intended raising deposit.
A corporate must get an issue of commercial paper rated and can issue
such paper subject to a minimum rating.

14. Credit Rating Agencies
• Credit Rating Information Services of India Limited (CRISIL)
• ICRA Limited
• Credit Analysis and Research limited (CARE)
• Brickwork Ratings (BWR)
• India Rating and Research Pvt. Ltd.
• Small and Medium Enterprises Rating Agency of India (SMERA)

15. Credit rating process
1. Receipt the request from the company.
2. Assignment to analytical team.
3. Collecting information and conducting preliminary analysis.
4. Communication of decision to the issuer.
5. Presentation of finding.
6. Site visit and interaction with management.
7. Dissemination to the public.
8. Continues monitoring.

16. Credit rating methodology
• Information is collected and then analyzed by a team of professionals in an
agency.
• If necessary, meeting with top management supplier and dealers and a visit to
the plant of proposed sites are arranged to collect additional data. This team of
professionals submit their recommendation to the rating committee.
• Committee discuss this report and then assigns rating.
• Rating assigned is then notified to the issuer and only on his acceptance, rating
is published.
• Assures confidentiality of information.
• once the issue decide to use and published the rating agency has to continuously
monitor it over the entire life of instrument called surveillance.

17. Credit rating symbol
Highest creditworthiness supported by many excellent factors. ... * A
plus (+) or minus (-) sign may be appended to the categories from AA to
CCC to indicate relative standing within each rating category. The plus
and minus signs are part of the rating symbols.

18. • AAA Highest creditworthiness supported by many excellent factors.
• AAVery high creditworthiness supported by some excellent factors.
• A High creditworthiness supported by a few excellent factors.
• BBB Creditworthiness is sufficient, though some factors require attention
in times of major environmental changes.
• BB Creditworthiness is sufficient for the time being, though some factors require
due attention in times of environmental changes.
• B Creditworthiness is questionable and some factors require constant attention.
• CCC Creditworthiness is highly questionable and a financial obligation of
an issuer is likely to default.
• CC All of the financial obligations of an issuer are likely to default.
• D R&I believes that all of the financial obligations of an issuer are in default.

19. Thank You