Chapter%207_Risk%20of%20Financial%20Intermediation

Chapter%207_Risk%20of%20Financial%20Intermediation - 1 PART...

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1 Prepared by Patty Robertson May not be used without permission PART II CHAPTER 7 Risks of Financial Intermediation
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Part II 2 Understand the risks that impact FI decision-making, as well as the associated risk management strategies. Learn how are these risk factors are interdependent. Relate all information to Bank of America. GENERALLY, BANKS WANT TO MAINTAIN A STABLE BALANCE SHEET WITH PREDICTABLE CASH FLOWS. WE ARE INTERESTED IN DOWNSIDE RISK
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Financial Intermediation Carries Risks 3 Cash Households Corporations Equity & Debt FI (Brokers) FI (Asset  Transformers) Deposits/Insurance  Policies Cash
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Risks Faced By FIs 4 Chapter 7 briefly introduces the major risk types faced by FIs, which will be covered in detail later in the course.
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Interest Rate Risk Interest rate risk is sourced from the mismatching of the maturities of FI assets and liabilities. Asset transformation involves issuing secondary securities to invest in/purchase primary securities.
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Chapter%207_Risk%20of%20Financial%20Intermediation - 1 PART...

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