Recommendation Policy makers are actually making a trade-off on the way to create and expand a GSE. This off-budget vehicle that funnels government subsidiaries to favorable motive was, in turn, bringing risks for the government. Effective accountability and supervision are a must-have to limit the risks. Stanton (2007) had few view points on the matter of accountability. The author believes that effective operations and balance between flexibility and accountability are vital. Failure due to too much autonomy in both private and public sectors are very common. Next, government backing private organization usually more expose to flaws and policy makers may found it difficult to act effectively. Understanding the potential costs of
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On top of that, a firm can actually diverge from the hedging strategy if they think there is unlikely for interest rate to change in one direction. Limiting retained portfolio size was one of the ways to reduce the risk. Amount of debt outstanding and portfolio interest rate derivatives used for hedging was reduced with limited portfolio size. In another word, this means that unhedged interest rate risk and retained portfolio act in the same direction (Chan, Davies & Gyntelberg, …show more content…
The flexibility of Farmer Mac on right to choose what capital measurements to apply should be forgone imposition of capital measurement are required in order to reduce and eliminate risk arise from capital arbitrage. This method was believed to reflect all business risks, quality and also leverage degree. The capital adequacy of Farmer Mac was very important and ideal level of capital allocation is hard to achieve as the risk degree of each agricultural mortgage was not the
On top of that, a firm can actually diverge from the hedging strategy if they think there is unlikely for interest rate to change in one direction. Limiting retained portfolio size was one of the ways to reduce the risk. Amount of debt outstanding and portfolio interest rate derivatives used for hedging was reduced with limited portfolio size. In another word, this means that unhedged interest rate risk and retained portfolio act in the same direction (Chan, Davies & Gyntelberg, …show more content…
The flexibility of Farmer Mac on right to choose what capital measurements to apply should be forgone imposition of capital measurement are required in order to reduce and eliminate risk arise from capital arbitrage. This method was believed to reflect all business risks, quality and also leverage degree. The capital adequacy of Farmer Mac was very important and ideal level of capital allocation is hard to achieve as the risk degree of each agricultural mortgage was not the