Define liquidity risk and state how this type of risk can be managed.
Define liquidity risk and state how this type of risk can be managed.
Homework Answers
LIQUIDITY RISK MEANS RISK WHICH IS ASSOCIATED TO LIQUIDITY OF THE INSTRUMENT. IT MEANS UNABLE TO MEET SHORT TERM FINANCIAL NEEDS. THIS IS OCCURS DUE TO INABILITY TO CONVERTED A SECURITY OR HARD ASSET IN TO CASH WITHOUT LOSS OF CAPITAL.
BY FOLLOWING WAYS LIQUIDITY RISK CAN BE MANAGED:
1.MONOTERING THE LIQUIDITY RISK PROFILE
2.CREATING AND IMPLEMENTING THE LIQUIDITY RISK CONTROLS
3.IDENTIFYING LIQUIDITY RISKS
4.DEFINING THE LIQUIDITY GOVERENANCE PRINCIPLES
5.FORECAST THE CASH FLOWS
6.OPTIMISING THE WORKING CAPITAL REQUIREMENTS ETC
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Define liquidity risk and state how this type of risk
can be managed.
Explain Define liquidity risk and explain how it relates to bonds and bond yields.
Explain
Define liquidity risk and explain how it relates to bonds and bond yields.
Which of the following statements regarding liquidity risk in correct? Explain why Asset liquidity risk arises...
Which of the following statements regarding liquidity risk in correct? Explain why Asset liquidity risk arises when a financial institution cannot meet payment obligations. Flight to quality is usually reflected in a decrease in the yield spread between corporate and government debt issuances. Yield spread between on-the-run and off-the-run securities mainly captures the liquidity premium. Funding liquidity risk can be managed by setting limits on certain asset markets or products and by means of diversification.
How could control systems be “managed” to alter outcomes? (Please type it out so it can...
How could control systems be “managed” to alter outcomes? (Please type it out so it can read better)
1) Explain liquidity risk, default risk, and taxability risk. How does each of these risks affect...
1) Explain liquidity risk, default risk, and taxability risk. How does each of these risks affect the yield of a bond? 2) Define what is meant by interest rate risk. Assume the manager of a $100 million portfolio of corporate bonds predicts interest rates will rise in the near future. What adjustments should be made to the portfolio assuming the market has not already adjusted for this prediction? 3) Normally, the Treasury yield curve is upward-sloping. Explain the conditions required...
c. Define the terms inflation premium (IP), default risk premium (DRP), liquidity premium (LP), and maturity...
c. Define the terms inflation premium (IP), default risk premium (DRP), liquidity premium (LP), and maturity risk premium (MRP). Which of these premiums is included in determining the interest rate on (1) short-term U.S. Treasury securities, (2) long-term U.S. Treasury securities, (3) short-term corporate securities, and (4) long-term corporate securities? Explain how the premiums would vary over time and among the different securities listed.
Explain liquidity risk, default risk, and taxability risk. How does each of these risks affect the...
Explain liquidity risk, default risk, and taxability risk. How does each of these risks affect the yield of a bond? In you opinion, should an individual or a company stay away from one specific risk compared to the others?
Define political and sovereign risk. How are companies impacted? What can a company do to mitigate...
Define political and sovereign risk. How are companies impacted? What can a company do to mitigate as much of that risk as possible? Give examples.
How the world is separated by risk , economics, and liquidity? Name the countries and explain...
How the world is separated by risk , economics, and liquidity? Name the countries and explain why they are in the position that they are in, in relation to other countries.
1. What is managed care? 2. What was the first type of managed care plans to...
1. What is managed care? 2. What was the first type of managed care plans to appear on the market? 3. How does a PPO differentiate itself from an HMO?
6. Liquidity risk Which of the following are sources of liquidity risk? Check all that apply....
6. Liquidity risk Which of the following are sources of liquidity risk? Check all that apply. An unexpected increase in the demand for loans An unexpected decrease in withdrawals by depositors An unexpected increase in withdrawals by depositors An unexpected increase in the market value of liabilities Which of the following are potential solutions to the liquidity problem? Check all that apply. Raising cash by selling Treasury bills and commercial paper Borrowing from the Federal Reserve Raising cash by issuing...
Explain
Define liquidity risk and explain how it relates to bonds and bond yields.
1) Explain liquidity risk, default risk, and taxability risk. How does each of these risks affect the yield of a bond? 2) Define what is meant by interest rate risk. Assume the manager of a $100 million portfolio of corporate bonds predicts interest rates will rise in the near future. What adjustments should be made to the portfolio assuming the market has not already adjusted for this prediction? 3) Normally, the Treasury yield curve is upward-sloping. Explain the conditions required...
c. Define the terms inflation premium (IP), default risk premium (DRP), liquidity premium (LP), and maturity risk premium (MRP). Which of these premiums is included in determining the interest rate on (1) short-term U.S. Treasury securities, (2) long-term U.S. Treasury securities, (3) short-term corporate securities, and (4) long-term corporate securities? Explain how the premiums would vary over time and among the different securities listed.
1. What is managed care? 2. What was the first type of managed care plans to appear on the market? 3. How does a PPO differentiate itself from an HMO?
6. Liquidity risk Which of the following are sources of liquidity risk? Check all that apply. An unexpected increase in the demand for loans An unexpected decrease in withdrawals by depositors An unexpected increase in withdrawals by depositors An unexpected increase in the market value of liabilities Which of the following are potential solutions to the liquidity problem? Check all that apply. Raising cash by selling Treasury bills and commercial paper Borrowing from the Federal Reserve Raising cash by issuing...
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