Moreover all are exposed to some degree of saver

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Unformatted text preview: nance companies, and so on, in fact they face risks that are more common than different. Specifically, all the FIs described in this and the next five chapters (1) hold some assets that are potentially subject to default or credit risk and (2) tend to mismatch the maturities of their balance sheets to a greater or lesser extent and are thus exposed to interest rate risk. Moreover, all are exposed to some degree of saver withdrawal or liquidity risk depending on the type of claims sold to liability holders. And most are exposed to some type of underwriting risk, whether through the sale of securities or by issuing various types of credit guarantees on or off the balance sheet. Finally, all are exposed to operating cost risks because the production of financial services requires the use of real resources and back-office support systems. In Chapters 7–28 of this textbook, we investigate the ways in which managers of FIs are measuring and managing this inventory of risks to produce the best return-risk trade-off for shareholders in an increasingly competitive and contestable market environment. Questions and Problem...
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