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Question

Which of the following statement is incorrect?

A Market risk is the risk that bank will not be able to generate enough cash to meet its required outflows Correct Answer Incorrect Answer
B Foreign Exchange Risk is a type of market risk Correct Answer Incorrect Answer
C The amount of Foreign Exchange Risk is dependent on the level of exposure and unanticipated changes. Correct Answer Incorrect Answer
D Bank is fully hedged only if it holds assets and liabilities of exactly the same maturities. Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

Market risk is the risk of loss arising from movements in market prices or rates away from the rates or prices set out in a transaction or agreement. Market risk includes: 1)    Interest Rate Risk 2)    Foreign Exchange Rate (Forex) Risk 3)    Commodity Price Risk and 4)    Equity Price Risk

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