Post Session Quiz- Principles Of Risk

1. The risk refers to a bank's inability to meet its cash flow obligations either on the asset side or on the liability side. Example: Run-on-the-Bank scenarios, Cash crunch, etc.

2. HSBC made a lot of long term loans on a fixed rate basis while funding on a floating rate basis. A sharp upward movement in the market interest rate causes the bank a loss of $ 100 million. What type of risk is this?

3. Herstatt had taken in all its currency receipts in Europe but had not made any of its US dollar payments when German banking regulators liquidated the bank at the end of the German business day. Counterparties were left holding unsecured claims against the insolvent bank's assets. What type of risk is this?

4. JPMorgan Chase disclosed on Friday that losses on its botched credit bet could climb to more than $7 billion and that the bank's traders may have intentionally tried to obscure the full extent of the red ink on the disastrous trades.

5. "If traders misrepresented a fact with the intent to defraud, they can be subject to criminal charges," what type of risk is this?