Chapter 12Liquidity Risk
Chapter 18Liability and Liquidity Management
FROM CHAPTER 12LIQUIDITY RISK
1. What is the asset adjustment (reduction or increase in assets or liabilities) to a
banks balance sheet if th
Consider the following balance sheet for WatchoverU Savings, Inc. (in millions):
(currently 10% annually)
30-year fixed-rate loans
(currently 7% annually)
Liabilities and Equity
1-year time deposits
Instructor: Jim Kyung-Soo. Liew, Ph.D.
Homework Assignment #2
7.1, 7.2, 7.3, 7.5, 7.9
Companies A and B have been offered the following rates per annum on a $20 million five-year loan:
Financial Institutions: Week 5
Liability and Liquidity
Deposit Insurance Etc.
To understand the nature of liquidity risk,
and to understand how deposit insurance
addresses liquidity risk
Worldcom bankruptcy: http:/en.wikipedia.org/wiki/MCI_Inc.
Balance sheet are grouped by
o Working capital (A measure of both a company's efficiency and its shortterm financial health. If a company's current assets do not exceed its
current liabilities, th
Chapter 08 - Interest Rate Risk I
Interest Rate Risk I
The Level and Movement of Interest Rates
The Repricing Model
Equal Changes in Rates on RSAs and RSLs
D a te
Ad j C l o sL o g -ret
L o g -l i kel i h o o d (ret)
1/2/19 9 0 359 .6 9
1/3/19 9 0
358 .76 -0.00258 9
1/4 /19 9 0
-0.008 6 5 7.4 8 3E-005
4 .1519 6 234 9 4
1/5/19 9 0
352.2 -0.009 8 04
Spring II, 2014
An FI that finances a euro () loan with U.S. dollar
($) deposits is exposed to
B. interest rate risk.
C. credit risk.
D. foreign exchange risk.
Consider the following bank data ( in $million):
Rate sensitive assets
Rate sensitive liabilities
Suppose interest rates increase by 1%. What will be the impact of the rate inc
SOLUTION QUIZ 4
The following information is for questions 67-70. An FI has $5 million in cash reserves with the Fed in
excess of its reserve requirements, $5 million in T-Bills, and a credit line of $10 million to borrow in the
repo market. It currently
Spring II, 2014
1)Daily earnings at risk (DEAR) is calculated as
A. the price sensitivity times an adverse daily yield move.
B. the dollar value of a position times
Principles and Practice
Timothy J. Gallagher
Colorado State University
Joseph D. Andrew, Jr.
2006 Freeload Press, Madison Wisconsin
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