1. Characterise the risk exposure(s) of the following FI transactions (ivii) by choosing one or more of...
Question:
1. Characterise the risk exposure(s) of the following FI transactions (i–vii) by choosing one or more of the risk types listed below:
Interest rate risk Credit risk Off-balance-sheet risk Technology risk Foreign exchange rate risk Country or sovereign risk A bank finances a $10 million, six-year fixed-rate commercial loan by selling one-year certificates of deposit.
An insurance company invests its policy premiums in a long-term municipal bond portfolio.
A French bank sells two-year fixed-rate notes to finance a two-year fixed-rate loan to a British entrepreneur.
A Japanese bank acquires an Austrian bank to facilitate clearing operations.
A managed fund completely hedges its interest rate risk exposure by using forward contingent contracts.
An Australian bond dealer uses its own equity to buy Mexican debt on the less-developed country (LDC) bond market.
An Australian securities firm sells a package of mortgage loans as mortgage-backed securities. LO 4.1, 4.3, 4.4, 4.5, 4.7, 4.8
Step by Step Answer:
Financial Institutions Management A Risk Management
ISBN: 9781743073551
4th Edition
Authors: Helen Lange, Anthony Saunders, Marcia Millon Cornett