Question: Using a relevant bank balance sheet, consider mortgage - backed securities and credit default swaps. Explain how both would expose the bank to greater risk.

Using a relevant bank balance sheet, consider mortgage-backed securities and credit default swaps. Explain how both would expose the bank to greater risk. Specifically, describe the types of risk a bank faces that we have discussed in the banking lectures, what types of risk does a mortgage-backed security expose a bank to? A credit default swap? Explain with specific reference to the relevant types of bank risk we have covered.

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