If a bank wants to shorten its asset duration, what type of risk is the bank concerned about?  Group of answer choices Off balance sheet risk. The risk of rising interest rates. The risk of falling interest rates. Foreign exchange rate risk.

Q: If a bank is exposed to refinancing risk, its profitability is higher if interest rates and if it is…

A: Refinancing risk refers to the risk that a bank's cost of funding (such as the interest rates it…

Q: 4) All else the same, if a bank's liabilities are more sensitive to interest rate fluctuations than…

A: Sensitivity to interest rate fluctuations comes under the phenomenon of Interest rate Gap, this…

Q: What differences between the daily market valuation of a traditional security and the valuation…

A: There is need of proper valuation of security there many methods of valuation.

Q: Do you agree that banks have high operating risks? Why?

A: The notion of operational risk in the banking system does not seem to be new. Nevertheless, it was…

Q: How can a bank mitigate LIQUIDITY RISK? Hold a large percentage of its liabilities in Core Deposits…

A: The correct answer for the above mentioned question is given in the following steps for your…

Q: Define interest rate risk and explain why it is very important in the risk management portfolio of a…

A: Interest rate risk is the potential for speculation misfortunes that emerge from a variation in…

Q: Which of the following actions cannot be used by banks to increase reserves? A. Sell Treasury…

A: Reserves  are parts of the income of a corporation that have been set aside to improve the financial…

Q: how can credit matrics model mitigate future credit risk issues for Washington Mutual

A: Washington Mutual (WaMu) was a large financial institution that was severely impacted by the 2008…

Q: decrease in reserve requirements could lead to an    A. increase in bank lending.   B. increase…

A: The Money supply and demand of money is affected by reserve requirement of bank which are placed by…

Q: The obvious benefit of holding a diversified portfolio of loans is to reduce the impact of single…

A: Yes, there are benefits of holding a non-diversified portfolio of loans as well for a bank.

Q: Having longer-maturity assets than liabilities causes banks to bear which of the following risks? I.…

A: a risk is an uncertain event that will occur or non-occurring and implies future uncertainty and…

Q: The following is true for banks managing interest rate risk:     In refinancing risk, banks gain…

A: Step 1 The ability of the bank or financial institution to refinance the matured liabilities at very…

Q: Which one of the following statements is FALSE? Select one: O a. Holding more liquid funds will…

A: Introduction and explanation :The yield of an asset refers to the return or profit generated from…

Q: Discuss how banks benefit when interest rates decrease?

A: Low-interest rate environment- It refers to the state of the economy when the risk-free rate of…

Q: Governments should disclose their vulnerability to specific types of risks A.) Credit risks B.) Co

A: Transparency is essential for effective governance, and disclosing vulnerabilities to risks is an…

Q: what is ADVANTAGES AND DISADVANTAGES OF THIS MORATORIUM  in banking to  BANKS . Give an example

A: MORATORIUM- is an option available to borrower to defer the EMI payment. During the moratorium…

Q: nterest rate swaps and gap analysis to manage interest rate risk.

A: There are two methods in which a bank can manage its interest rate risk  (a) by matching the…

Q: Systemic risk is a) credit risk. b) an insurance contract against the default of one or more…

A: Systemic risk refers to the risk of widespread disruption or collapse of an entire financial system…

Q: The risk of not having sufficient cash and borrowing capacity to meet deposit withdrawals, loan…

A: Interest rate risk refers to risk of change in value of investments due to change in interest rates…

Q: When borrowers tend to pay back the loans to bankers earlier, the bank is facing    a. Repricing…

A: Repricing risk is associated with the the rate of changes in the interest rate charged. It occurs…

Q: TRUE OR FALSE 1. Short-term financial policies that are flexible with regard to current assets…

A: 1. Short-term financial policies that are flexible with regard to current assets includes keeping…

Q: Loans Loan Expected Standard Amount Return Deviation A $ 15 8.1% 1.1% million В $ 15 9.2% 1.3%…

A: The following solution is given below:

Q: Is it correct to state that banks’ returns will be higher if interest rates increase? Outline the…

A: The duration analysis is the method through which the financial institutions determine the change in…

Q: Value at Risk (VaR) is a statistical measure of maximum loss used by banks and other financial…

A: Value at Risk is a technique used by institutions to analyze the potential risk assessed in the…

Q: Why is writing deep-in-the-money currency options tantamount to short-term financing?

A: A deep in the money option is an options contract where the strike price of the option is…

Q: Why do banks hold reserves? How do banks decisions on reserves affect the money supply?

A: Bank reserves are the minimum cash requirements that must be kept by financial firms or institutions…

Q: Explain the concept of liquidity risk in banking. Why is it important to control liquidity risk?

A: Liquidity refers to the ability of a bank to meet its cash and collateral obligations without…

Q: Assess the following statements: I. Default risk is the risk that a security issuer will default on…

A: The risk that a lender assumes in the event that a borrower is unable to make the required payments…

Q: Liquidity risk is a. The risk of doing business in a particular industry or environment b. The…

A: When short term debt obligations of individual investor or business or financial institutions are…

Q: Describe about the foreign currency risk.

A: Foreign currency- As we know every country has its own currencies in which it operates. Hence,…

Q: Are there any advantages to the equity-holders of banks from them engaging in short-term as opposed…

A: Equity holders enjoy the return from two sources i.e. from the company's end in the form of a…

Q: If a bank has , rate-sensitive assets than liabilities, then in interest rates will increase bank…

A: Lets understand the meaning of rate sensitive asset and liabilities. Rate sensitive asset and…

Q: Which of the following best describes interest rate risk? The risk that credit ratings will change,…

A: The effect of interest rates refers to the impact that changes in the cost of borrowing money have…

Q: Match the best answer to each statement. This category include short-term, highly liquid investment…

A: Current assets refer to the assets of a company that are held for the short term and capable of…

Q: What kind of interest rate swap would a commercial bank with a negative re-pricing gap (that is,…

A: We have to find out an appropriate kind of interest rate swap for a commercial bank with a negative…

Q: Njenge Bank has the following balance sheet (in millions). Liabilities and Equity. Deposits…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: A bank finds that its assets are not matched with its liabilities. It is taking floating rate…

A: A swap is a financial derivative arrangement in which two parties exchange the cash flows or…

Q: hich one is not an incentive for a bank to Securitize its mortgage loans? A) Reduce insurance…

A: The objective of the question is to identify which among the given options is not a reason for a…

Q: The average maturity of its assets is larger than that of its deposits, as is typical of most banks.…

A: “Hey, since there are multiple questions posted, we will answer first question. If you want any…

Q: If a bank has a positive repricing gap (RSAs > RSLs), then: Does this bank have reinvestment or…

A: The problem case focuses on identifying the impact of the positive repricing gap on the risk and…

Q: Why has the trend in bank supervision moved awayfrom a focus on capital requirements to a focus on…

A: Bank supervision is generally conducted in order to ensure that the banking operations are conducted…

Q: When borrowers tend to pay back the loans to bankers earlier, the bank is facing a. Repricing risk O…

A: Since, more than one different questions are posted, answer for the first question is only provided…

Q: b) Why is the risk-adjusted return on capital (RAROC) an important tool in credit risk management…

A: The risk-adjusted return on capital (RAROC) is an important tool in credit risk management for…