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  • I.Functionsof Abank'Ssecurityportfolio: Chapter10:Investmentfunctioninfinancial

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    Huế Hoàng
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    C10

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    11 views1 page

    I.Functionsof Abank'Ssecurityportfolio: Chapter10:Investmentfunctioninfinancial

    Uploaded by

    Huế Hoàng

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 1

    Stabilize income

    Offset credit risk exposure

    Provide geographic diversification.

    Provide a backup source of liquidity

    I.Functions of Treasury Bills


    Reduce tax exposure
    a bank’s security portfolio
    Short-Term Treasury Notes and Bonds
    Serve as collateral

    Federal Agency Securities


    Hedge against interest rate risk

    Certificates of Deposit
    Provide flexibility II.Popular Money Market
    Investment Instruments
    International Eurocurrency Deposits
    Dress up the balance sheet

    Bankers’ Acceptances
    1 Structured Notes
    Commercial Paper
    2 Securitized Assets IV.Other more recent investment
    Short-Term Municipal Obligations
    3 Stripped Securities
    Treasury Notes and Bonds

    Municipal Notes and Bonds


    III.Popular Capital Market
    Expected rate of return Investment Instruments
    Corporate Notes and Bonds
    Chapter 10: Investment function in Financial
    Asset-Backed Securities
    The Tax Status of State and Local Government Bonds

    how market interest rates differ( loans + securities of varying term (time) to maturity)

    The Tax Exposure


    Bank Qualified Bonds

    The Tax Swapping Tool More easily with -securities


    The Yield Curve
    The Portfolio Shifting Tool
    Topic branch 1
    interest rate < value of bonds
    information about under or over securities
    VI.Maturity Management Tools
    longer-term bonds- greater interest risk Interest Rate Risk
    information about risk-return trade-off
    Hedgig risk= options, future, swaps
    Present Value Weighted Average Maturity of the CFs
    Default risk Duration
    V.Factors Affecting Choice
    Used to Insulate the Securities From Interest Rate Change
    of Investment Securities
    Business risk

    Breadth and Depth of Secondary Market


    Liquidity Risk
    Treasury Securities are Generally the Most Liquid

    corp have the right to retire Securities before their maturity

    call when interest rate fall Call risk

    investor find new services with lower return

    Prepayment risk

    Inflation risk

    The Ladder or Spaced-Maturity Policy

    The Front-End Load Maturity Policy

    The Back-End Load Maturity Policy Investment Marturity Strategies

    The Barbell Strategy

    The rate expectation approach

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