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Which of the following situations could decrease the accuracy of using duration to predict an expected change in a bank's asset or liability value ?
Which of the following situations could decrease the accuracy of using duration to predict an expected change in a bank's asset or liability value ?
a. when the difference in maturity of a banks asset and liabilities becomes larger.
b. when interest rate shocks become smaller.
c. when the difference in maturities of a banks assets and liabilities become smaller.
d. when interest rate shocks become larger.
which of the following statements regarding immunization is correct?
a. If a bank perfectly matches the maturities of the assets and liabilities, it should achieve perfect immunization for equityholders against interest rate risk
.
If banks need to satisfy regulatory requirements, they are required to match the durations of their assets with the leverage-adjusted durations of their liabilities.
O C.
If a bank immunizes a portfolio of its assets or liabilities against interest rate risk, the bank expects that the portfolio will neither gain nor lose its value when interest rates fluctuate.
O D. Banks can immunize their portalios by matohing the fraturites of their assets with their liabilities.
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