Explain the following statements: "(1) individual financial institutions will generally have unimportant effects on market prices or the economy as a whole and (2) serving their financial interests always safeguards stability of the financial system" according to microprudential approaches?
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A: Answer - Securities :- These are a financial instrument which has non-negotiable and has…
Q: Explain the process of securitisation and discuss its role in the 2008 global financial crisis
A: Securitization is the method of converting the receivables of the financial institutions, i.e.,…
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A: Financial Intermediaries:- Financial intermediaries function as go-betweens for financial…
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A: The financial of 2007-08 started in US and rapidly stretched to European Union and later to other…
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Q: Identify and explain the main factors that contributed to the financial crisis of 2007-2008.
A: Financial crisis refers to a situation in which investors sell their assets and withdraw their money…
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A: Financial Regulation : Financial Regulation can be defined as a form of regulation, laws or rules…
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A: Haircut means the disparity b/w the amount of a loan & collateral which is set up for it. For…
Q: List any six categories of factors that could cause a financial crisis.
A: Since , financial crisis in a economy is a situation where the value of the assets fall drastically…
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A: When product or a particular service is manufactured, cost takes place and process of business…
Q: Contrast the risk tolerance and Liquidity needs for Banks and Individual investors
A: Introduction There is always a risk in life when there is an opportunity to gain. Knowing how much…
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A: The circular flow of pay or roundabout stream is a model of the economy where the significant trades…
Q: Explain potential conflict of interest in the operational structure of systematically important…
A: i) Conflict of interest In a conflict of interest, a person or organization has numerous interests…
Q: EXPLAIN DYNAMICS OF FINANCIAL CRISES
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A: The financial sector consists of businesses and institutions that provide financial services to both…
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A: Adverse selection refers to the problem where bad credit risks are more eager to take the loans and…
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A: In perfectly competitive markets, the information is equally shared by the economic agents-…
Q: Explain what is the function of the following components in a country's financial system.…
A: A system that in turn allows fund exchange between market participants including investors, lenders,…
Q: What can emerging market countries do to strengthenprudential regulation and supervision of their…
A: The market of a growing country that gets further active with foreign markets as it expands is an…
Q: Why is it a good idea for macroprudential policies torequire countercyclical capital requirements?
A: Macro-prudential policies are policies being financial by nature.
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A: No, i would not recommend the adoption of a system of deposit insurance, like the FDIC in the United…
Q: Which of the following statements is incorrect? a. Holdings of liquid assets (or access to credit…
A: The right answer is Option C
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Q: he Dodd Frank Act does not address some of the issues related to the financial crisis and recession…
A: Dodd Frank Act came in July 21, 2010 to strengthen the financial system and rules governing it, so…
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A: In an economy, lending refers to transferring excess funds of an individual or institutions to the…
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A: Financial intermediaries are institutions that connect the borrowers and lenders by acting as the…
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A: Asymmetric information is a situation the information possessed by the parties is not symmetric. In…
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A: The financial crisis is a situation in the economy in which the price of asset decline steeply,…
Q: If bad credit risks are the ones who most actively seek loans, then financial intermediaries face…
A: When the parties involved in any economic activity do not have same or symmetric information about…
Q: Why are financial intermediaries willing to engagein information collection activities when…
A: The financial intermediaries provide different instruments to their customers. They provide…
Q: Explain the following statements: “(1) individual financial institutions will generally have…
A: A macroprudential approach supervises and regulating to ensure stability for general equilibrium and…
Q: Explain how financialinnovation led to thegrowth of the shadowbanking system
A: Shadow banking provides institutions the means to form accounting entities to isolate risks,…
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A: In an economy, the central bank has the right to influence the functioning of financial institutions…
Q: Câu 2: Assignments CAR is a measurement of a bank's available capital expressed as a percentage of a…
A: A bank is an institution that provides the facility for loans and deposits. It means as the bank…
Q: Discuss the following statements: “(1) individual financial institutions will generally have…
A: Financial institutions are central banks, all the retail banks and insurance agencies. These do have…
Q: Securities Exchange Act of 1934 The following are correct statements related to the Decline in…
A: Now traditional banking system is declined, because, banking industry especially commercial banks…
Q: An understanding of the adverse selection and moral hazards can help us better understand financial…
A: Moral Hazard:- It can be explained as a situation where one party shares incorrect details of alters…
Q: What are the convergence of issues that led to and caused the subprime financial crisis of 2007-2008
A: Financial crisis of 2007-2008, particularly known as mortgage crisis was basically the result of…
Q: The 2016 elections in the United States Multiple Choice led to resistance to Dodd-Frank becoming…
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- Q1: Define and differentiate between: a) Organized exchanges and Over the counter markets b) Open Ended vs Closed Ended Mutual Funds c) Moral Hazard and Adverse selection Q2: What is meant by asset transformation and how is it the basis for differentiating between indirect finance and direct finance? Q3: What are the three main reasons for regulating financial markets and institutions? Also list the major regulation examples under each of the three reasons. Q4: What value do mutual funds add for individual investors and how? Q5: Using the relevant financial securities and institutions, explain the chain of events which lead to the 2007 global financial crisis. Q6: Last year Fauji Fertilizer Company Limited (FFCL) gave an annual dividend per share of Rs. 8.85 which is expected to grow at 5%, forever. Calculate the per share price of the stock if its required rate of return is 14%? Q7: Calculate the duration of a 7-year coupon bond having a 11% coupon rate. The current market…The Minsky Model of a Financial Crisis . Economist Hyman Minsky believed “…the financial system in a market economy is unstable, fragile, and prone to crisis.” Explain in some detail how the financial system is “unstable, fragile and prone to crisis,” according to Minsky What did the psychological term euphoria mean to Hyman Minsky? In other words, define the term as Minsky would define it Briefly specify (but do not explain) the primary case against the market system of economic organizationExplore the assertion regarding the state ofFinancial Markets, both globally and within the Caribbean region, evaluating whether they arecharacterized by market perfection or imperfection. Argue in favorthat markets are perfect , allowing for a comprehensive examination ofthe topic. To enhance the analysis of key points in the subject argument, it is imperative to employrelevant finance theories or concepts which either validate or refute the EMH. These concepts serveas a robust framework for understanding financial phenomena. By leveraging established concepts,one can systematically evaluate the evidence presented, thereby bolstering the argument'scredibility and depth.
- Assume that the government sets a binding price ceiling on the interest rate that banks charge on loans. Explain carefully the impact of this policy on the financial marketsDiscuss the following statements: “(1) individual financial institutions will generally have unimportant effects on market prices or the economy as a whole and (2) serving their financial interests always safeguards stability of the financial system” according toa) microprudential b) macroprudential approaches?Explain why you would be more or less willing to buylong-term Delta Air Lines bonds under the followingcircumstances:a. The company just released its financial statements, indicating that income decreased and liabilities increased.b. You expect a bull market in stocks (stock prices areexpected to increase).c. You have analyzed your country’s monetary policyand expect interest rates to decrease.d. Brokerage commissions on bonds fall.e. Your income and wealth increased over the last two years
- Suppose the U.S. economy began to grow morerapidly than other countries in the world. What would bethe likely impact on U.S. financial markets as part of theglobal economy?Which of the below statements is false for frictionless financial markets? A.No transactions costs B.No corporate and personal taxes C.No agency costs between shareholders and debtholders D.Information asymmetry between managers and investorsDiscuss the Contribution of Stephen Ross(1976) to the theory of Financial Economics and identify the risk factors (in his model) which are applicable in our economy
- What role does executive compensation play in risk-taking and accountability? Why do some people partially blame compensation for the failures of the subprime mortgage and financial industries in 2008-2009?Why are financial intermediaries willing to engagein information collection activities when investors infinancial instruments may be unwilling to do so?What are the transaction costs problems facing financialorganizations? Explain how financial intermediaries canhelp reduce these problems.