Market and Liquidity Risk-Quiz

1. Liquidity risk refers to risk which the institution cannot meet the obligation or cannot settle debt obligation or settle position in the specific economic and financial situation and market situation.

• True

• False

• Not Given

2. The followings are situations where liquidity risk can cause problems EXCEPT

• Having sufficient cash in premise for clients.

• Large depositors' withdrawal

• Liquid assets becoming illiquid

3. The factors that influence Liquidity Risk are:

• The changes of borrowing rate

• Too much dependence on oversea loan or large creditors

• All of these

4. Interest rate risk consists of:

• Gap risk, Base risk, Option risk

• Gap risk, Basis risk, Option risk

• Gap risk, Basis risk, Opportunity risk

5. Sivlyly borrows $1 000 000 with the interest rate of 7% p.a meaning that she has to pay $70 000. Next year, she has foreseen that the rate will be higher than that of last year, 9% p.a. Due to this potential increase, she buys a forward rate at 7% from Lyhour Bank for $10 000 in the thought that she will not have to pay the 9% interest rate.

This is the example of:

• Gap risk

• Basis risk

• Option risk

6. Forex risk stand for:

• Foreign Exchange Rate Risk

• Forward Exchange Rate Risk

• Foreign Export Risk

7. Forex risk management allows the bank to protect itself against the risk of exchanging rate losses.

• True

• False

• Not Given

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