Final Exam
1. What are the two reasons liquidity risk arises? How does liquidity risk arising from the liability side of the balance sheet differ from liquidity risk arising from the asset side of the balance sheet? What is meant by fire-sale prices?
2. a. What is meant by marketrisk?
b. Why is the measurement of market risk important to the manager of a financial institution?
3. What is the primary function of an insurance company? How does this function compare with the primary function of a depository institution?
4. What is the adverse selection problem? How does adverse selection affect the profitable management of an insurance company?
5. What are the similarities and differences among the four basic lines of life insurance products?
Hand written, time 90 mins