GF 510 Purdue Global University Credit Risk Research Paper



GF 510

Purdue Global University


Question Description

Chapter 7: Problem

15. What is credit risk? Which types of FIs are more susceptible to this type of risk? Why?

30. What is market risk? How does this risk affect the operating performance of financial institutions? What actions can be taken by an FI’s management to minimize the effects of this risk?

Chapter 8: Problem

21. What are some of the weaknesses of the repricing model? How have large banks solved the problem of choosing the optimal time period for repricing? What is runoff cash flow, and how does this amount affect the repricing model’s analysis?

Chapter 9

1. What is the difference between book value accounting and market value accounting? How do interest rate changes affect the value of bank assets and liabilities under the two methods? What is marking to market?

2. What are the two different general interpretations of the concept of duration, and what is the technical definition of this term? How does duration differ from maturity?

12. How is duration related to the interest elasticity of a fixed-income security? What is the relationship between duration and the price of the fixed-income security?

Unformatted Attachment Preview

GF510: Risk Analysis and Management | Unit 1 Assignment 1 Assignment: Text book problems Complete the following questions from your text: • • • Complete Questions and Problem 15 and 30 in Chapter 7 Complete Questions and Problem 21 in Chapter 8 Complete Questions and Problem 1, 2, 12 in Chapter 9 Please submit one Word file, including a title page to the Dropbox for the Unit 1 Assignment. All work submitted must be in your own words and all calculations must be shown. No credit will be given for the correct answer alone. Any calculations should be done in Excel and pasted into the Word document using the “Paste Special-Excel Worksheet Object” feature. This will allow the instructor to double click on the students work to see the formulas and calculations used to answer the selected problems. Once completed, submit your Assignment to the Unit 1 Assignment 1 Dropbox. Assignments are due Tuesday 11:59 p.m. ET of their assigned unit. GF510: Textbook problems Points are earned based on critical thinking, analysis, and correct and thorough responses to the following: Points Possible Complete Questions and Problem 15 and 30 in Chapter 7 10 Complete Questions and Problem 21 in Chapter 8 10 Complete Questions and Problem 1, 2, 12 in Chapter 9 10 Grammar and Writing Style 5 Total Points 35 Points Earned
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Running Head: GF510 UNIT 1 ASSIGNMENT 1

GF510 Unit 1 Assignment 1
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GF510 Unit 1 Assignment 1

Chapter 7
Question 15
Credit risk is a term used in economics to denote the possibility of a borrower not be able to meet
their contractual obligations towards the payment of the dues in lieu. The following are the types
of financial institutions which are more susceptible to this kind of risk. They include, smallmedium enterprises, cooperative societies, small money lending institutions, brokerage firms and
insurance companies (Lanstein & Sharpe, 2018). The reason why they are susceptible is because
of; first, the nature of the market. For instance, the insurance business is a risky business and incase
of large compensations, they may be forced to borrow and fail to pay. Secondly, the aspect of
recurrent expenditure, where the expenditure surpasses their income.
Question 30
Market risk is the risk based on the fact that the value of an item may decrease, as a result of

GhgbeUA (25004)
UT Austin

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