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g) Contingent credit risk is more serious for futures contracts than forward contracts because the over-the-counter arrangements necessary to replicate the guarantees at a later date.

g) Contingent credit risk is more serious for futures contracts than forward contracts because the over-the-counter arrangements necessary to replicate the guarantees at a later date.

ECON MICRO
ECON MICRO
5th Edition
ISBN:9781337000536
Author:William A. McEachern
Publisher:William A. McEachern
Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance
Section: Chapter Questions
Problem 4.8P
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True or False g) Contingent credit risk is more serious for futures contracts than forward contracts because the over-the-counter arrangements necessary to replicate the guarantees at a later date. h) In the event of a bank run, depositor claims on the bank are satisfied on a pro rata basis. i) Portfolio risk can be reduced through diversification only if the returns of the loans in the portfolio are negatively correlated. j) A systematic loan loss risk is based on historic loss ratios and is a measure of the sensitivity of loan losses in a particular business sector relative to the losses in and FI's loan portfolio.
Transcribed Image Text:True or False g) Contingent credit risk is more serious for futures contracts than forward contracts because the over-the-counter arrangements necessary to replicate the guarantees at a later date. h) In the event of a bank run, depositor claims on the bank are satisfied on a pro rata basis. i) Portfolio risk can be reduced through diversification only if the returns of the loans in the portfolio are negatively correlated. j) A systematic loan loss risk is based on historic loss ratios and is a measure of the sensitivity of loan losses in a particular business sector relative to the losses in and FI's loan portfolio.
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