With reference to the study entitled, "Loan portfolio diversification, market structure and bank stability" by Shim (2019), discuss the interlink among loan diversification, market concentration, and financial stability.
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- How does a bank try to achieve the best possible risk adjusted return on its overall loan portfolio?Estimating liquidity needs involves:A. forecasting the level of future loan commitments and depositsB. establishing a liquidity budgetC. forecasting interest rate levelsD. a and cDiscuss the importance of financial markets, then illustrate with a diagram the flow of funds from lenders to borrowers in a financial system.
- Question #2. If we know the projected cash flows from loan notes and their current market value, what approach would we take to deducing the cost of the loan notes?Discuss briefly the liquidity preference theory (LFT) and differentiate it from the loanable funds (classical) model of interest rate determination. Provide a graph.Illustrate with a diagram the flow of funds from lenders to borrowers in a financial system. Diagram must include: Savers Borrowers Financial markets Function of the financial intermediaries Function of the financial markets Direct finance Indirect finance
- are designed to indicate the potential default risk that lenders are undertaking when they grant a loan. Repayment capacity ratios O Financial efficiency ratios Profitability ratios Solvency ratios Liquidity ratiosExplain the context of monetary policy : financial stability? Example?Describe the incremental analysis approach for evaluating aproposed credit policy change.
- Answer it correctly please. Give proper reason.Explain the following concepts in relation to the role that banks play in financial markets: i) Loan size transformation ii) Maturity transformation iii) Risk transformationWho decides about the level of reference rate? Select one alternative: financial market central bank finance minister