Podcast
Questions and Answers
What is financial risk?
What is financial risk?
The possibility of losing money on an investment or business venture.
Name three factors that contribute to financial risk in financial markets.
Name three factors that contribute to financial risk in financial markets.
Various macroeconomic forces, changes to the market interest rate, and possibility of default by sectors of large corporations.
What are two types of risk faced by corporations mentioned in the text?
What are two types of risk faced by corporations mentioned in the text?
Bad publicity and the possibility of default on debt or failure in an undertaking.
Explain the difference between external and internal risks in the banking business.
Explain the difference between external and internal risks in the banking business.
What is the first C in the five Cs of credit system and what does it specifically refer to?
What is the first C in the five Cs of credit system and what does it specifically refer to?
How can yield spreads be used in an efficient market to infer credit risk levels?
How can yield spreads be used in an efficient market to infer credit risk levels?
What is the purpose of the five Cs of credit system used by lenders?
What is the purpose of the five Cs of credit system used by lenders?
Give an example of a situation that reflects a failure in the capacity aspect of the five Cs of credit system.
Give an example of a situation that reflects a failure in the capacity aspect of the five Cs of credit system.
What is the practice called when lenders charge a higher interest rate to borrowers who are more likely to default?
What is the practice called when lenders charge a higher interest rate to borrowers who are more likely to default?
What are some stipulations that lenders may write into loan agreements as covenants?
What are some stipulations that lenders may write into loan agreements as covenants?
How do lenders and bond holders hedge their credit risk?
How do lenders and bond holders hedge their credit risk?
What is the risk associated with a sovereign state freezing foreign currency payments or defaulting on its obligations?
What is the risk associated with a sovereign state freezing foreign currency payments or defaulting on its obligations?
How is DTI calculated by lenders?
How is DTI calculated by lenders?
What impact does a lower DTI have on a borrower's chance of qualifying for a new loan?
What impact does a lower DTI have on a borrower's chance of qualifying for a new loan?
How does a large contribution by the borrower affect the chance of default?
How does a large contribution by the borrower affect the chance of default?
How does collateral help a borrower secure loans?
How does collateral help a borrower secure loans?
