As Securitization of Assets Continues to Expand, the Management of Market

question 4

True/False

As securitization of assets continues to expand, the management of market risk will become more important to FIs.

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Definitions:

CAPM

The Capital Asset Pricing Model is a framework that explains the connection between the expected return on assets, especially stocks, and their systematic risk.

Characteristic Line

A line in finance that shows a security's expected returns as a function of the overall market's returns.

Market Return

The total return on investment, including capital gains and dividends, from investing in the stock market over a specific period.

CAPM Equation

The formula used in the Capital Asset Pricing Model that describes the relationship between the risk of an investment and its expected return.