Even If Individual Banks Are Good at Forecasting Risk Using

question 52

Multiple Choice

Even if individual banks are good at forecasting risk using VaR models,there may still be problems because losses may occur at several banks at the same time due to the interdependency of the financial system,magnifying each bank's risk exposure and possibly causing a major problem for regulators.The book calls this:

• A)systemic risk.
• B)operational risk.
• C)credit risk.
• D)market risk.
• E)liquidity risk.

---

Definitions:

Utility Function

A mathematical representation of how different quantities of goods or services translate into levels of happiness or satisfaction for an individual or society.

Utility Function

A mathematical representation that assigns a value to every possible choice to indicate the level of satisfaction or utility that choice provides to a consumer.

Demand

The quantity of a good or service that consumers are willing and able to purchase at a given price over a specified period of time.

Income

Remuneration obtained regularly through employment or investment activities.