What Does 'Constrained Optimisation' in the Context of Liquidity Management

question 38

Multiple Choice

What does 'constrained optimisation' in the context of liquidity management refer to?

• A)It refers to the case that any liquid asset holdings over and above the reserve requirements imposed by regulators need to be balanced by the same amount of short-term liabilities.
• B)It refers to the case that any increases in an FI's current liability holdings incur a decrease in the profitability of the FI's liquidity holdings.
• C)It refers to the case that any liquid asset reserve requirements imposed by regulators set a minimum bound on the level of liquid reserve assets in the balance sheet.
• D)It refers to the case that any liquid asset reserve requirements imposed by regulators need to be balanced by the same amount of short-term liabilities.

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Definitions:

Medicare

A federally funded health insurance program for people 65 years and over who are eligible for Social Security.

Federally Funded

Financially supported or subsidized by a national government.

Low Income

The condition of earning at or below a specified threshold of income, often used to determine eligibility for certain social services or tax benefits.

Double Indemnity

An optional provision in life insurance policies that provides that the insurer will pay double the amount due to a beneficiary if the insured dies from accidental causes.