SVB Collpase

All the instruments have positive CONVEXITY except :

• Fixed Coupon Bonds

• Options

• Mortgage Backed Security

• Zero Coupon Bond

The Silicon Valley Bank collapsed due to :

• Insolvency

• Asset Liability Mismatch

• Bad Loans

• Investment in US govt. bonds

A bank run is :

• Sudden withdrawal of deposits

• Mark to Market Loss on investments

• Huge NPAs

• Sudden repayment of loans

An Mortgage Backed Security (MBS) is :

• Asset backed securities that are formed by pooling together home loans

• Asset backed securities that are formed by pooling together vehicle loans

• Asset backed securities that are formed by pooling together gold loans

• Asset backed securities that are formed by pooling together any loans

The duration of MBS in case of prepayment will:

• Increase

• Decrease

• Unchanged

• None of the above

The duration of MBS in case of increase in interest rate will:

• Increase

• Decrease

• Unchanged

• None of the above

If a bank starts receiving huge deposits while the credit growth is tepid then the net interest margin of the Bank will:

• Increase

• Decrease

• Unchanged

• None of the above

What is the biggest risk faced by investors in MBS backed by high-quality mortgages and/or backed by strong credit enhancement or guarantees :

• Credit risk

• Default Risk

• Prepayment Risk

• All

The main purpose of providing credit enhancement to bonds is :

• to reduce credit risk

• to increase the profitability

• to reduce rollover risk

• All

Silicon Valley Bank (SVB) prior to its collapse announced its intention to raise capital. The main reason for capital raise by SVB was:

• to shore up capital, lost due to MTM loss on its investments

• to increase its profitability

• to decrease chances of default

• None of the above