Question 4 (10 marks)

a) ABC Bank relies upon its online trading platforms and communication systems to execute trades and maintain communication with customers. What category of risk best defines this type of risk exposure? (2 marks)

b) Describe what you understand by a Call Option and a Put Option. (4 marks)

c) During the GFC, the funding of longer-term assets with short-term borrowing was identified as a point of weakness in the operations of financial institutions. Discuss this statement with reference to the matching principle. (4 marks)