One Suggested Method of Reducing Excessive Risk-Taking by SIFIs Is

question 45

Multiple Choice

One suggested method of reducing excessive risk-taking by SIFIs is to require them to hold ________ capital when credit is expanding rapidly and ________ capital when credit is contracting.

• A)less;more
• B)more;no
• C)more;less
• D)less;no

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Definitions:

Interest Rate Volatility

The extent to which interest rates fluctuate over time due to market forces, economic policies, or external events.

Financial Engineering

Creation of new securities or financial processes.

Long-Term Financial Risk

The possibility of experiencing financial losses or failures that arise over an extended period, often due to changes in market conditions, interest rates, or other economic factors.

Short-Term Financial Risk

The risk associated with the need to meet financial obligations in the near term, often within one year.