All financial institutions provide different financial products and services that expose them to different types of risks that require different risk mitigating practices and techniques. These risks include; credit risk liquidity risk, interest rate risk, market risk, foreign exchange risk, solvency risks, operational risks and model risk. Which of the following is not true about credit risk? Select one: a. Performance risk is similar to credit risk. The borrower´s performance on an operation or specific project determines the degree of transaction risk. b. Measures based on the credit quality of the debt. As ratings are ordinal measures, they are sufficient to value credit risk. c. The risk of the issuers and borrowers are evaluated in prices in a capital market setting and can be seen visibly, or through credit spreads, or as add-ons to the risk-free rate. d. Credit risk is similar to country risk, which is essentially the risk crisis in a country. Examples of country risk includes the devaluation of the domestic currency held by banks, an economic down turn, sovereign risk, convertibility risks, market crisis etc.
All financial institutions provide different financial products and services that expose them to different types of risks that require different risk mitigating practices and techniques. These risks include; credit risk liquidity risk, interest rate risk, market risk, foreign exchange risk, solvency risks, operational risks and model risk. Which of the following is not true about credit risk?
Performance risk is similar to credit risk. The borrower´s performance on an operation or specific project determines the degree of transaction risk.
Measures based on the credit quality of the debt. As ratings are ordinal measures, they are sufficient to value credit risk.
The risk of the issuers and borrowers are evaluated in prices in a capital market setting and can be seen visibly, or through credit spreads, or as add-ons to the risk-free rate.
Credit risk is similar to country risk, which is essentially the risk crisis in a country. Examples of country risk includes the devaluation of the domestic currency held by banks, an economic down turn, sovereign risk, convertibility risks, market crisis etc.
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