Learning Goal: I’m working on a finance writing question and need an explanation and answer to help me learn.
- 1 What are the different types of risks the banks and other financial institutions are exposed to?
- 2 What are the Asset-Liability Management Strategies? Explain.
- 3 Explain the loanable fund theory of Interest Rate Determination.
- 4 What are the different types of derivatives? Take an example and explain Interest rate swaps.
- 5 Calculate the interest-sensitive GAP (IS GAP) and Relative IS GAP ratio for a financial institution if interest-sensitive assets (ISA) are $100 million and interest-sensitive liabilities (ISL) are $125 million. Is that firm an Asset sensitive? Explain.