Question
Indicate whether each statement is true or false. a) A naive hedge is the hedge of a cash asset on a direct dollar-for-dollar basis with
Indicate whether each statement is true or false. a) A naive hedge is the hedge of a cash asset on a direct dollar-for-dollar basis with a forward or futures contract. (.) b) Liability side risk arises from transactions whereby a creditor, depositor, or other claim holder demands cash in exchange for the claim. (.) c) To manage liquidity risk a Depository Institution can use purchased liquidity management or stored liquidity management. (.) d) Stored liquidity management involves borrowing funds in the money/purchased funds market. (.) e) A positive GAP (RSA > RSL) exposes the FI to reinvestment risk. (.) f) If interest rates change, interest income and interest expense will change as the various assets and liabilities are repriced, that is, receive new interest rates. (.) g) The book value of capital is the difference between the Book Value of assets and the Book Value of liabilities. (.)
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