Question: 1. While recognizing that OBS ( Off- Balance Sheet) instruments may add to the risk of an FIs activities, explain how they also work to

1. While recognizing that OBS ( Off- Balance Sheet) instruments may add to the risk of an FIs activities, explain how they also work to reduce the overall insolvency risk of FIs

2. Other than hedging and speculation, what reasons do FIs have for engaging in OBS activities?

3. What is the difference between VAR and ES?, and why ES is superior to VAR as a measure of market risk?

4. Why is duration considered a more complete measure of an assets or liabilitys interest rate sensitivity than maturity?, and when is the duration of an asset equal to its maturity?

5. a- How can FIs change the size and the direction of their repricing gap?

b- Why is it useful to express the repricing gap in terms of a percentage of assets? What specific information does this provide?

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