To Be More Precise in Measuring Interest Rate Risk, the Runoff

question 41

True/False

To be more precise in measuring interest rate risk, the runoff component of long-term mortgages should be considered in the time buckets in which the maturities actually occur.

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Definitions:

Walras's Law

A principle in general equilibrium theory stating that if all markets but one are in equilibrium, then the remaining market must also be in equilibrium.

Cobb-Douglas Utility Functions

A particular form of utility function used in economics that represents preferences over two goods, characterized by their constant elasticity of substitution.

Pareto Optimal

A distribution state of resources where no adjustment can be made to better the position of any individual or evaluation criterion without negatively affecting another.

Consumption Externalities

The impact of one's consumption activities on the welfare of others that is not reflected in market prices, either positive or negative.