Using the CorporateMetrics Methodology on the Market Risk Quantification in Nippon Steel Corporation

Chuhao Fu

Master's thesis

Abstract:

The aim of this thesis is to forecast the operating profit of Nippon Steel in 2023 under specific assumptions through the CorporateMetrics method. In accordance with the structure of the thesis, in addition to the introductory chapter, this thesis contains four other chapters. Chapter 2 is a methodology chapter that will provide an overview of all the methods used in this thesis. The most important of these is the introduction of the CorporateMetrics, the core methodology of this thesis, where the author will provide a detailed description of the background to the proposal of this methodology, its definition, the steps to use it, its strengths and weaknesses, and so on. For the financial model used in this thesis, it will be focus on Geometric Brownian Motion, and to ensure the completeness, it will also shortly introduce Monte Carlo simulation. At the end of this chapter, it will also present sensitivity analysis, which is a common method used in financial analysis to observe the overall impact of changes in individual factors. Chapter 3 will focus on Nippon Steel, which is the company chosen for this thesis. As one of the top steel companies in the world, this thesis will focus on the introduction of basic information about the company, the company's products and markets, the company's history and the company's main risks. Chapter 4 is the results presentation and analysis chapter, which is the core of this thesis, meanwhile, all the methods have been introduced in Chapter 2. In this chapter, the author will start with the processing of raw data and go step by step to the final result of the operating profit of Nippon Steel in 2023. Meanwhile, at the end of the chapter, the author will use the sensitivity analysis to see the effect on Nippon Steel's operating profit by adjusting selling, general and administrative expenses and other operating income separately. Chapter 5 is the concluding chapter. It will present conclusion based on the calculations presented in Chapter 4.

Abstract:

The aim of this thesis is to forecast the operating profit of Nippon Steel in 2023 under specific assumptions through the CorporateMetrics method. In accordance with the structure of the thesis, in addition to the introductory chapter, this thesis contains four other chapters. Chapter 2 is a methodology chapter that will provide an overview of all the methods used in this thesis. The most important of these is the introduction of the CorporateMetrics, the core methodology of this thesis, where the author will provide a detailed description of the background to the proposal of this methodology, its definition, the steps to use it, its strengths and weaknesses, and so on. For the financial model used in this thesis, it will be focus on Geometric Brownian Motion, and to ensure the completeness, it will also shortly introduce Monte Carlo simulation. At the end of this chapter, it will also present sensitivity analysis, which is a common method used in financial analysis to observe the overall impact of changes in individual factors. Chapter 3 will focus on Nippon Steel, which is the company chosen for this thesis. As one of the top steel companies in the world, this thesis will focus on the introduction of basic information about the company, the company's products and markets, the company's history and the company's main risks. Chapter 4 is the results presentation and analysis chapter, which is the core of this thesis, meanwhile, all the methods have been introduced in Chapter 2. In this chapter, the author will start with the processing of raw data and go step by step to the final result of the operating profit of Nippon Steel in 2023. Meanwhile, at the end of the chapter, the author will use the sensitivity analysis to see the effect on Nippon Steel's operating profit by adjusting selling, general and administrative expenses and other operating income separately. Chapter 5 is the concluding chapter. It will present conclusion based on the calculations presented in Chapter 4.

Keywords

CorporateMetrics, Market risk, Simulation, Operating profit, Exchange rate

Keywords

CorporateMetrics, Market risk, Simulation, Operating profit, Exchange rate

Language used: English

Date on which the thesis was submitted / produced: 26. 4. 2024

Thesis defence

• Date of defence: 28. 5. 2024
• Supervisor: Miroslav Čulík
• Reader: Petr Gurný

VSB – Technical University of Ostrava

Ekonomická fakulta

Master programme:
Finance