If lines of credit and other off-balance sheet activities do not, by definition, appear on the bank’s balance sheet, how can they influence the level of liquidity risk to which the bank is exposed?
Answer to relevant QuestionsDuration analysis is an alternative to gap analysis for measuring interest-rate risk. The duration of an asset or liability measures how sensitive its market value is to a change in the interest rate: the more sensitive, the ...Suppose a bank faces a gap of -20 between its interest-sensitive assets and its interest-sensitive liabilities. What would happen to bank profits if interest rates were to fall by 1 percentage point? You should report your ...Why have technological advances hindered the enforcement of legal restrictions on bank branching?Why did government-sponsored enterprises (GSEs) such as Freddie Mac and Fannie Mae have substantially higher leverage ratios than the average U.S. bank in the years preceding the financial crisis of 2007-2009? Explain how ...You examine the balance sheet of an insurance company and note that its assets are made up mainly of U.S. Treasury bills and commercial paper. Is this more likely to be the balance sheet of a property and casualty insurance ...
Post your question