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Financial Transactions Risks

Financial Transactions Risks

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Published by: bhsgirl on Nov 14, 2011
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University of Phoenix Material

Week Four Individual Assignment: Financial Transaction Risks Describe the risk exposure(s) in the following financial transactions. Identify which transactions are influenced by interest rates or interest income. (CAUTION: Some can be influenced by both!) Risk Types: Interest rate risk, Credit risk, Technology risk, Foreign exchange rate risk, Country or sovereign risk

Financial Transactions

Risk Typ e

Describe and justify risk type

Interest Rate or Inter est Inco me?

A bank finances a $10 million, six-year fixed-rate commercial loan by selling one-year certificate of deposit. An insurance company invests its policy premiums in a long-term municipal bond portfolio. A French bank sells two-year fixed-rate notes to finance a two-year fixed-rate loan to a British entrepreneur. A Japanese bank acquires an Austrian bank to facilitate clearing operations. A bond dealer uses his own equity to buy Mexican debt on the less developed country (LDC) bond market. A securities firm sells a package of mortgage loans as mortgage-backed securities. Describe the features of the method you would choose to measure the interest risks identified.

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