kindly do both questions asap. 1. During the financial crisis and afterwards gol

Question

kindly do both questions asap.

1. During the financial crisis and afterwards gold prices skyrocketed. Discuss why gold prices changed. Is gold always a good investment in uncertain times? Why has gold's performance changed now? Is it possible that Bitcoin will replace the function of gold in the future? Discuss. 2. Explain all the following risk types and make an example about each of these cases. Please also provide a detail explanation how these types of risks may interact with each other under certain circumstance. a. credit risk b. interest rate risk c. foreign exchange risk d. country or sovereign risk e, technology risk f market risk g liquidity risk

Explanation / Answer

During the recent uneven situations in the global markets, including the US downgrading and the Euro zone issues, investors started investing money into gold. Consequently the demand for gold has gone up. And, as there is no other comparably safe assets to invest in, the price of gold skyrocketed. Gold has been up for recent decade. The fluctuation in gold would mainly be because of the high demand and the interest of consumers here for gold. The marriage season, in particular, fuels the demand. However, Gold is still the best hedge against volatility.

As forecasted earlier, this latest move seems to be generating technical buying and we imagine those holding the significant short interests in the market are feeling increasingly uncomfortable. Lately we have been seeing more and more headlines asking whether cryptos are "killing" gold. Would the gold price be higher today if massive amounts of money weren't flowing into bitcoin? Both assets, after all, are sometimes favoured as safe havens. They're decentralized and accepted all over the world, 24 hours a day. Transactions are anonymous. Supply is limited. But I don't think for a second that cryptocurrencies will ever replace gold, for a number of reasons. Unlike cryptos, gold doesn't require electricity to trade.

2) A credit risk is a risk of default on debt which may arise from a borrower due to failing of making required payments. Examples include Credit Card Loans, Personal loans etc.

Interest rate risk is the risk that arises for owners who own bond by way of fluctuating interest rates. This risk on a bond depends on how sensitive the price is to interest rate changes in the market. Normally the sensitivity depends on two things, bonds maturity and its coupon rate.

Foreign exchange risk is that, which arises when a financial transaction is denominated in a currency other than that of the home currency of the company in which it is domiciled. Foreign exchange risk also exists when the foreign subsidiary of a firm maintains financial statements in a currency other than the home currency of the consolidated entity.

Country risk refers to the risk of investing or lending in a country, arising by way of possible changes in the business environment which may severely affect country`s operating profits & value of assets.

Market risk is the risk of losses in positions arising due to changes in the market prices. There is no particular classification as each classification may refer to different types and aspects of market risk. The most commonly used types of market risk are Equity Risk, Interest rate risk, Currency risk, commodity risk, margining risk, Shape risk, Holding period risk and basis risk.

Liquidity risk is the risk that the entity is unable to meet short term financial requirements. This risk generally occurs when we are unable to convert a asset to cash without any loss of income or the capital portion of the asset which is being liquidated.

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