a. Use the following list of risk management tools and describe the
circumstances under which they would be applied to the risk categories
of corporate (including risk associated with acquisition analysis and
capital budgeting), economic, foreign currency, political, and other
relevant global business risks.
a.      Black-Scholes options pricing model
b.      Simulation analysis
c.       Hedging
d.      Feel free to add other tools that you find that are relevant to Wal Mart

Wal-Mart uses the Black Scholes model to value stock options granted
to employees for the purpose of calculating their associated
compensation expense pursuant to Statement of Financial Accounting
Standards No. 123.

"On February 1, 2003, the Company adopted the expense recognition
provisions of Statement of Financial Accounting Standards No. 123, ?
Accounting and Disclosure of Stock-Based Compensation? (?SFAS 123?).
Under SFAS 123, compensation expense is recognized based on the fair
value of stock options granted. Upon the adoption of SFAS 123, we
retroactively restated the results of our operations for the
accounting change. Following the provisions of SFAS 123, the
consolidated statements of income for fiscal 2005, 2004 and 2003
include $122 million, $102 million and $84 million, respectively, of
after-tax stock option expense, which is approximately $0.03 per share
in fiscal year 2005 and $0.02 per share for fiscal years 2004 and
2003. In December, 2004, the Financial Accounting Standards Board
issued a revision of SFAS 123 (?SFAS 123(R)?). We adopted the
provisions of SFAS 123(R) upon its release. Prior to the adoption of
SFAS 123(R), we used the Black-Scholes-Merton formula to estimate the
value of stock options granted to Associates. We continue to use this
acceptable option valuation model following our adoption of SFAS
123(R). SFAS 123(R) requires that the benefits of tax deductions in
excess of recognized compensation cost be reported as a financing cash
flow, rather than as an operating cash flow as required under
previously effective accounting principles generally accepted in the
United States. The adoption of SFAS 123(R) did not have a material
impact on our results of operations, financial position or cash
flows."

"Form 10K" Wal-Mart (March 31, 2005)
http://yahoo.brand.edgar-online.com/doctrans/finSys_main.asp?formfilename=0001193125-05-066992&nad=
Wal-Mart could potentially use simulation for a variety of reasons,
including constructing its hedging strategy, determining where and
when to open stores and distribution centers, and managing credit risk
associated with its credit card business and hedging activities. 
Simulation can also be used to value potential acquisition candidates.

Here are a few examples of how simulation is applied to financial issues:
"1. Credit Risk Modeling for Catastrophic Events (Tarja Joro of the
University of Alberta, and Paul Na of Bayerische Lanndesbank)
2. Using Simulation to Model and Value Growth Companies (Samuel Kou of
Harvard University, and Steve Kou of Columbia University).
3. Importance Sampling for Multimodal Functions and Applications to
Pricing Exotic Options (Athanassios Avramidis, University of Montreal)
4. Portfolio Optimization for Capital Investment Projects (Jay April,
Fred Glover and James Kelly, OptTek Systems, Inc.)
5. Hedging Beyond Duration and Convexity (Jian Chen of Fannie Mae, and
Michael Fu of the University of Maryland)"

"Risk Analysis Track Introduced at the Winter Simulation Conference.

" By Jim Finnegan, Financial Engineering News (2005)
://www.google.com/url?sa=U&start=1&q=http://www.fenews.com/fen30/one_time_articles/wsc_conference.html&e=10167

The company hedges its interest rate and exchange-rate exposure using
swaps of various kinds.  Given that the company buys items from one
country in one currency and sells them later in another country for a
different currency, hedging against exchange-rate changes is very
important to avoid losses on such transactions.

"The Company uses derivative financial instruments for hedging and
non-trading purposes to manage its exposure to interest and foreign
exchange rates. Use of derivative financial instruments in hedging
programs subjects the Company to certain risks, such as market and
credit risks. Market risk represents the possibility that the value of
the derivative instrument will change. In a hedging relationship, the
change in the value of the derivative is offset to a great extent by
the change in the value of the underlying hedged item. Credit risk
related to derivatives represents the possibility that the
counterparty will not fulfill the terms of the contract. The notional,
or contractual, amount of the Company?s derivative financial
instruments is used to measure interest to be paid or received and
does not represent the Company?s exposure due to credit risk. Credit
risk is monitored through established approval procedures, including
setting concentration limits by counterparty, reviewing credit ratings
and requiring collateral (generally cash) when appropriate. The
majority of the Company?s transactions are with counterparties rated
?AA-? or better by nationally recognized credit rating agencies."

""Form 10K" Wal-Mart (March 31, 2005)
http://yahoo.brand.edgar-online.com/doctrans/finSys_main.asp?formfilename=0001193125-05-066992&nad="

Sincerely,

Wonko