Analyse what exposure banking institutions had to the subprime mortgage crisis and how MBSs contributed to this exposure
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Analyse what exposure banking institutions had to the subprime mortgage crisis and how MBSs contributed to this exposure
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- How does a bank try to achieve the best possible risk adjusted return on its overall loan portfolio?Critically analyze concepts behind MBSs and how risk was diversified to secure lending. Analyze what exposure banking institutions had to the subprime mortgage crisis and how MBSs contributed to this exposureWhat risks might commercial bank operations face by funding long-term loans such as mortgages to borrowers (often at fixed interest rates) with short-term deposits from savers? What steps could the financial institution take to reduce these risks?
- Explain the concept of “Value-at-Risk” (VAR) in the context of banks’ credit risk management. How is VAR linked to regulatory capital requirements?Methods/instruments that banks use to hedge the risks pertaining loansProvide an explanation of whether it is advantageous for a bank to classify debt investments as “held to maturity “or “available for sale” if the required return by the market declines? What impact will this have on the bank's balance sheet and net income?
- Which of the following decreases the likelihood of bank failures by keeping banks from making risky loans? FDIC insurance The discount window Reserve requirements Capital requirementsWhy do federally guaranteed loans usually have the least risk for banks, List some popular guaranteed loan programs.How does credit risk for a financial institution differs from default risk and What are the problems faced by a financial institution to measure credit risk?
