What are the two reasons liquidity risk arises? How does liquidity risk arising from the liability side of the balance sheet differ from liquidity risk arising from the asset side of the balance sheet? What is meant by fire-sale prices?
Answer to relevant QuestionsThe probability distribution of the net deposit drain of a DI has been estimated to have a mean of 2 percent. a. Is this DI increasing or decreasing in size? Explain. b. If a DI has a net deposit drain, what are the two ways ...What is a bank run? What are some possible withdrawal shocks that could initiate a bank run? What feature of the demand deposit contract provides deposit withdrawal momentum that can result in a bank run?A DI has $ 10 million in T-bills, a $ 5 million line of credit to borrow in the repo market, and $ 5 million in excess cash reserves (above reserve requirements) with the Fed. The DI currently has borrowed $ 6 million in fed ...The Plainbank has $ 10 million in cash and equivalents, $ 30 million in loans, and $ 15 million in core deposits. Calculate (a) The financing gap (b) The financing requirement.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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