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gf510 unit 1 assignment 1

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Chapter 7: Problem

15. What is credit risk? Which types of FIs are more susceptible to this type of risk? Why?

30. What is market risk? How does this risk affect the operating performance of financial institutions? What actions can be taken by an FI’s management to minimize the effects of this risk?

Chapter 8: Problem

21. What are some of the weaknesses of the repricing model? How have large banks solved the problem of choosing the optimal time period for repricing? What is runoff cash flow, and how does this amount affect the repricing model’s analysis?

Chapter 9

1. What is the difference between book value accounting and market value accounting? How do interest rate changes affect the value of bank assets and liabilities under the two methods? What is marking to market?

2. What are the two different general interpretations of the concept of duration, and what is the technical definition of this term? How does duration differ from maturity?

12. How is duration related to the interest elasticity of a fixed-income security? What is the relationship between duration and the price of the fixed-income security?

 
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