How banks use internal credit rating systems

a) Explain how banks use internal credit rating systems in their credit risk
management.
(4 marks)
b) Define Value at Risk. Critically discuss the advantages and
disadvantages of Value at Risk as a measure of risk. You must choose TWO
companies listed on New York Stock Exchange, NASDAQ, London Stock
Exchange, or the Exchange of the country where you come from, say Stock
A and B. Download a minimum 61 days of price data of the two companies A
and B ending February 2022. (1) What is the 99%, 5-day VaR for a 1 million
dollar investment in stock A? (2) What is the 99%, 5-day VaR for a 1 million
dollar investment in stock B? (3) What is the 99%, 5-day VaR for a 1 million
dollar investment in stock A and 1 million dollar investment in stock B? (4)
What is the benefit of diversification for the 99% VaR?
(8 marks)
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c) On 20 April 2020, the price of one American oil futures contract
plunged to be negative for the first time in history. Explain the reasons behind
this and critically discuss its implications on risk management and investment.
(5 marks)