chap7 - Wall Street is a street that begins in a graveyard...

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1 “Wall Street is a street that begins in a graveyard and ends in a river.” Anonymous
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2 Interest Rate Risk The impact of unanticipated changes in interest rates on the FI’s market value. Arises from mismatched maturities. FIs typically issue longer term assets to finance funds deficit units and obtain shorter term liabilities to offer claims to funds surplus units. So: typically FIs face refinancing risk – the risk of rolling over borrowed funds over the longer life of the asset investment.
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3 Market Risk The impact of unanticipated changes in exchange rates, securities prices and interest rates on the FIs’ market value. Interest rate risk can be considered a subtopic under market risk. Arises in both the trading book and the more stable banking book.
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4 Credit Risk The impact of unanticipated changes in
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This note was uploaded on 08/27/2011 for the course FINANCE Fixed Inco taught by Professor Proflim during the Three '09 term at University of Adelaide.

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chap7 - Wall Street is a street that begins in a graveyard...

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