Questions from Financial Markets

Q: Explain the concept of duration to someone who has no training in

Explain the concept of duration to someone who has no training in economics.

Q: You hold a portfolio of bonds. You read in the financial

You hold a portfolio of bonds. You read in the financial press that market interest rates have increased. Holding everything else constant, what has just happened to the duration of your bond portfoli...

Q: Bill is confused about why liquidity risk management is such a problem

Bill is confused about why liquidity risk management is such a problem for banks. He says, “It’s simple. If banks are worried about liquidity risk, why don’t they just hold a lot of liquid assets?” Ho...

Q: Credit default swaps often were issued by banks, yet many argue

Credit default swaps often were issued by banks, yet many argue they were actually an insurance product and thus should have been issued only by regulated insurance companies. Explain this argument....

Q: The Federal Reserve was established, in part, to be the

The Federal Reserve was established, in part, to be the “lender of last resort” to the banking system. Why can’t we rely on the Federal Reserve to ensure there is enough liquidity in the banking syste...

Q: Which of the following is not a source of liquidity for banks

Which of the following is not a source of liquidity for banks?

Q: Explain how a bank that makes only loans in the domestic market

Explain how a bank that makes only loans in the domestic market can still face exchange rate risk.

Q: Explain how the Volcker Rule was designated to limit market risk banks

Explain how the Volcker Rule was designated to limit market risk banks face.

Q: Which of the following is a type of operational risk banks face

Which of the following is a type of operational risk banks face?

Q: Explain why an increase in a bank’s ROA may or may not

Explain why an increase in a bank’s ROA may or may not be a reason to purchase the bank’s stock.