1. Voyager is a major player in fixed income investments. With total assets of more than $ 200 billion, its portfolio consists of 75 percent in Public Corporate Securities, 15 percent in Private Placements, and 10 percent in structured securities (such as CDOs). As is common with many fixed income investors, the company has a per-issuer exposure limit based on issuer rating, ranging from $375mm to AAA and AA, $325 for A, $250 for BBB, $100 for BB and $50 for lower grades. The risk management unit has been hearing concerns from the portfolio managers that the issuer limits have become too restrictive and they are finding it harder to put new money to work because many of the creditworthy names are approaching the corporate issuer limit. A possible solution to this problem is increasing the per-issuer limits. 

Provide a recommendation for a set of new limits.

Summarize your recommendation and explain your rationale to support your recommendation. 

Indicate (in the recommendation), what other information you need to complete the analysis and what assumptions (if any) you employed.

Explain (in the recommendation) what analytical modelling (if any) you conducted to establish the new limit?

(The evaluation of this question will be based on your reasoning and analytical process, and how you present the recommendation.)

Answer rating: 100% (QA)

Recommendation for New Issuer Exposure Limits at Voyager Summary I recommend a flexible and tiered approach to adjust issuer exposure limits based on ... View the full answer