EaR Analysis by Applying CorporateMetrics Methodology

Haoyu Lin

Master's thesis

Abstract:

The main goal is to use the CorporateMetrics methodology to predict the Sinopec's operating profit in 2021 under market risk. This thesis includes five chapters. The first chapter is a general introduction to the thesis. The second chapter deals with a theoretical description. The third chapter focuses on Sinopec. The fourth chapter applies the CorporateMetrics methodology to the analysis of the selected company. The fifth chapter is a conclusion of the whole thesis. In chapter 2, the theoretical introduction to CorporateMetrics is divided into three main parts. These are definition of CorporateMetrics, framework components and the comparison to other risk management tools. The framework components include the metric specification, the exposure mapping, the scenario generation, valuation and the risk computation. In chapter 3, the Sinopec will be introduced in more detail. It will start with a general introduction to Sinopec, followed by the history of the company. A brief overview of Sinopec's main competitors will also be presented and compared. Finally, a SWOT analysis of Sinopec will be presented. In chapter 4, the part of CorporateMetrics that will be used to measure risk, mainly using the Earning-at-Risk analysis. The 1000 scenarios of crude oil prices and market rates will be modelled. Then, the parameters that will be used to calculate the operating profit will then be calculated. Finally, a valuation of the operating profit can be obtained. The results are expressed as frequency and probability distributions and are also presented graphically

Abstract:

The main goal is to use the CorporateMetrics methodology to predict the Sinopec's operating profit in 2021 under market risk. This thesis includes five chapters. The first chapter is a general introduction to the thesis. The second chapter deals with a theoretical description. The third chapter focuses on Sinopec. The fourth chapter applies the CorporateMetrics methodology to the analysis of the selected company. The fifth chapter is a conclusion of the whole thesis. In chapter 2, the theoretical introduction to CorporateMetrics is divided into three main parts. These are definition of CorporateMetrics, framework components and the comparison to other risk management tools. The framework components include the metric specification, the exposure mapping, the scenario generation, valuation and the risk computation. In chapter 3, the Sinopec will be introduced in more detail. It will start with a general introduction to Sinopec, followed by the history of the company. A brief overview of Sinopec's main competitors will also be presented and compared. Finally, a SWOT analysis of Sinopec will be presented. In chapter 4, the part of CorporateMetrics that will be used to measure risk, mainly using the Earning-at-Risk analysis. The 1000 scenarios of crude oil prices and market rates will be modelled. Then, the parameters that will be used to calculate the operating profit will then be calculated. Finally, a valuation of the operating profit can be obtained. The results are expressed as frequency and probability distributions and are also presented graphically

Keywords

CorporateMetrics, Earning-at-Risk analysis, operating profit, market risk, exchange rate

Keywords

CorporateMetrics, Earning-at-Risk analysis, operating profit, market risk, exchange rate

Language used: English

Date on which the thesis was submitted / produced: 22. 4. 2022

Thesis defence

• Date of defence: 23. 5. 2022
• Supervisor: Miroslav Čulík
• Reader: Petr Gurný

VSB – Technical University of Ostrava

Ekonomická fakulta

Master programme:
Finance