Liquidity risk

is fee was introduced by the Bank of Jamaica in an effort to encourage the use of RTGS for large value transactions (i.e. transactions with a value of JMD$5,000,000 or more), and thus reduce the liquidity, credit and settlement risks. BOJ has advised that if the volume of large value transactions is reduced by 50% over an assessment period then this penalty fee per transaction will not be incurred by banks, and as such customers will be reimbursed at that time…

Country risk is associated with lending or depositing funds, FDI, or any other financial transaction, in a country. Risks can include both political and economic risks, currency blockage, expropriation, financial uncertainties, and inadequate access to hard currencies. Understanding country risk in a global context is important as companies move from being domestic to multi-national companies. Country risk can impact decisions on investment of capital budget, whether to portfolio invest in…

Table 1. The size of the expected losses as a result of risks impact on business reputation of Bank B Type of threats Frequency of losses emergence, % Size of the expected losses, mon. un. 1. Receipt of the credit according to fraudulent documents 1,333 8 316 521,2 2. Partial or complete loss of the credit pledge 15,09 94 145 765,5 3.Violation of an order of loan debt restructuring 7,549 47 097 838,5 4. IT systems failure 7,735 48 258 283,4 5. Shortage of money in ATM cartridges 1,28 7…

the risk and return tradeoff, where if there is high risk it will compensate with high return as well as the low risk with lower return. The risk can be classified into two types which are systematic (uncontrollable) risk and unsystematic (controllable) risk. The examples of systematic risk are the interest rate risk, inflation risk, foreign exchange risk, country risk, political risk and market risk. Meanwhile, the example of unsystematic risk is business risk, liquidity risk and credit risk.…

The global financial crisis has highlighted the importance of early identification of the riskier banks, because this allows for solving the problem at lower cost. The factors that influence bank risk can be divided into two main groups: (1) bank specific factors, which are a result of direct managerial decision and includes non-deposit/wholesale funding, asset structure, capitalisation, profitability, efficiency and size and (2) factors related to industry structure and macroeconomic…

Monthly cash-flow in advance, save the investor from the market risk Relatively low rate of return, does not at par with inflation, lack of liquidity during investment period, Safe Income, Fixed Annuity Get a safe and definite income Invest in money market, banking instruments like FD, RD, or government bonds A steady and regular income, immune from market risk Very low interest rate and hence low income for small savings Growth, Variable Annuity Capital appreciation…

Current theories of the role of financial intermediaries are built on the failure in the financial market. Five the main theories explain why financial intermediaries exist: Delegated monitoring, information production, liquidity transformation, consumption smoothing and commitment mechanisms. One of these five main theories concerns the ability of financial intermediaries in producing information. The expression “asymmetric information” refers to the imperfect distribution of the information.…

diversification mean? Explain in details and give specific examples special in finance. The term portfolio diversification is defined as “investing in different asset classes and in securities of many issues in an attempt to reduce overall investment risk and to avoid damaging a portfolio's performance by the poor performance of a single security, industry, (or country).” (Nasdaq n.d.) One describes the theory of portfolio diversification as not putting all your eggs in one basket. Portfolio…

MANAGING INTEREST RATE RISK The interest rate risk management is very important and many technical instruments have been developed to understand the interest rate risk. The interest rate risk majorly comes up in interest bearing asset like loan and bonds as there exist a possibility of change in asset’s which is the result of variability of interest rates. FUNDAMENTAL INTEREST RATE CONSIDERATIONS The trading of variable rate loan structure is involved during interest rate swaps having fixed…

4. How did Banc One control the other risks associated with its derivatives portfolio? 4.1 Managing Basis Risk Although the synthetic investments were effective in managing Banc One’s interest rate exposure, they created basis risk. Most of Banc One’s floating-rate assets were based on the prime rate, which changed infrequently at bankers’ discretion. However, most of conventional interest rate swaps and its AIRS used to reduce earnings sensitivity were based on the three-month LIBOR, which…