Below are the risks associated with Mortgage loans Credit Risk is the risk to earnings from borrowers failure to meet the bank’s contract Interest rate risk to earnings from fluctuation of interest rates in market Price risk is the risk to earning from changes in the values of foreign exchange, equity etc Transaction risk is […]Continue Reading... No Comments.
Apart from ensuring appropriate liquidity, investors should also consider the risks present in the money market investments. Investments in the money market are basically unsecure in nature. While the unsecured nature does indicate a higher risk, the risks associated with money market, however, are not necessarily due to the unsecured nature but more due to […]Continue Reading... No Comments.
All the banks and financial institutions must have proper risk management in place in order to mitigate all the possible risks that we have already specified in other posts. Now we will go through different risk management strategies that the banks or financial institutions can adapt in order to lower their risk exposure or mitigate […]Continue Reading... No Comments.
Sometimes banks invest in attractive instruments with higher risk in order to earn higher profit. To mitigate such risks banks use risk transfer strategy where it transfers the credit risk to another party that is willing to take the risk. This strategy has become very popular in USA just before the subprime crisis where banks […]Continue Reading... No Comments.
The most important risk management strategy is Risk mitigation where the banks use all their expertise and different methods to mitigate their risk exposures. Risk can be mitigated in number of ways like diversification, continuous monitoring of the risk exposure and proper due diligence before providing loans. Diversification ensures that the risks that are specific […]Continue Reading... No Comments.