Foreign Exchange Exposure Management for US Financial Institutions

It can be reduced by aggregating exposure across all units in a financial holding company

It can be reduced by offsetting imbalances in its trading book

It can only be reduced by matching its foreign currency assets to liabilities in a given currency

Both A and B (correct)

It has no impact on their net exposure across all units

It allows them to reduce their net exposure across all units (correct)

It allows them to eliminate their net exposure across all units

It allows them to increase their net exposure across all units

A portfolio with imbalances in its trading book

A portfolio with foreign currency assets and liabilities in different currencies

A portfolio with a net exposure to foreign exchange

A portfolio with matching foreign currency assets to liabilities in a given currency (correct)

<p>Credit risk is the most serious risk faced by banks, referring to the chance that a borrower may fail to repay their debt obligations.</p> Signup and view all the answers

<p>The financial strength of a bank or FI is primarily captured by how much equity it has relative to the riskiness of its assets.</p> Signup and view all the answers

<p>If a bank's equity falls below the regulatory minimum, the bank falls into trouble.</p> Signup and view all the answers

<p>Net worth refers to the bank's equity value.</p> Signup and view all the answers

<p>Credit risk can lead to loan defaults, resulting in a decrease in the bank's net worth.</p> Signup and view all the answers