1. Identify and categorize the business risks that are present in the project. You should provide clear and well-documented identification of the sources of business risks in the ship finance transaction.
The students need to answer the questions provided in the case study. The case study involves a Shipowner, a Charterer, and a Bank who combine to construct a Special Purpose Vehicle (SPV) for a project. Each student in a group will be assigned as a representative of one of the corresponding parties to complete the project work, so each group constitutes of representatives of (1) Shipowner, (2) Charterer (IG GROUP), (3) Bank, and (4) SPV Operator.
Each student has to identify and analyze the risk exposures for their party separately and provide risk management strategies for all business risks (including freight rate, bunker price, vessel value, interest rate, foreign exchange rate, and credit risks) associated with them. Your report aims to propose clear and well-argued risk management strategies for the hedging of the various sources of risk that surround the project (ship finance transaction). Your report should be structured into the following sections, for each party separately:
1. Identify and categorize the business risks that are present in the project. You should provide clear and well-documented identification of the sources of business risks in the ship finance transaction. You may also provide support from both the academic and business literature to support your arguments, as well as from the latest advances within the industry.
2. Provide a hierarchy of risk exposures in terms of importance (significance of risk exposure) about the project, with proper justification. You should be able to provide a numerical representation for each risk exposure identified in the previous step, and provide a rationale and a scenario analysis (good, average, worst).
3. Provide all the available hedging methods (both “traditional” and financial) for each source of risk identified in the project. You should first provide an application of all available “traditional” risk management methods and comment on their possible limitation(s) with respect to the specific ship finance project. Then you should present and thoroughly analyze all available alternative derivatives products for hedging each source of risk, and for each party.
4. Select, for each risk, the best available hedging product, according to your justified opinion, and provide a numerical application using the appropriate figures from the project and derivatives prices from the market. All calculations must be analytical and in-depth.
5. You should write a clear and concise list of recommendations supported by appropriate arguments based on the previous risk management analysis in the report.
You are free to use any graphs, figures, and tables to support your justifications.
(PLEASE USE GRAPHS,FUGURES,TABLES FROM THE REFERENCES,LITERATURE)
• All calculations must be fully explained and based on the available information.
• All arguments must be critically evaluated based on the latest academic and business literature.
• The use of literature must be fully referenced, and a reference list must be provided at the end of the assignment.
Front sheet and font (Arial 11 pt. or Times New Roman 12 pt., and 1.5 line spacing, but the List of References should have single line spacing). Use the APA format for referencing.
● Maximum number of words, excluding the title page, table of content, and list of references;
Each Student Word Limits – 3000 words “ONLY THE CHARTERERS PART-IG GROUP” (+ 10 % acceptable).
This assignment needs to be answered carefully by starting from the first quesiton which state to identify and categorize the business risks that are present in the project. You should provide clear and well-documented identification of the sources of business risks in the ship finance transaction. You may also provide support from both the academic and business literature to support your arguments, as well as from the latest advances within the industry.
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