Economically speaking, OBS activities are contractual claims that

Question

Quizplus · Accepted Answer

A) OBS activities represent potential future events, such as loan commitments, unused lines of credit, or derivatives contracts, that may or may not occur.

B) If the contingency does occur, it can result in a transfer of assets or liabilities onto the financial institution's balance sheet, impacting their financial position and risk exposure.

C) The use of OBS activities can impact the economic value of the equity, as the value of these activities is subject to market risks, such as interest rate fluctuations, credit risk, or currency risk.

D) If the contingency never occurs, the OBS activity may have been effectively a wasted effort, with no significant impact on the financial institution's balance sheet or earnings.

Economically Speaking, OBS Activities Are Contractual Claims That