Takedown or draw-down risk in a loan commitment exposes the FI to:
A)immediate liquidity risk
B)basis and spread risk
C)externality effects
D)future liquidity risk

Question

Quizplus · Accepted Answer

Takedown or draw-down risk means the borrower may not draw down the entire loan at once and the lender may need to provide additional funds gradually. This exposes the financial institution to future liquidity risk as it may need to hold additional funds in case the borrower exercises its option to draw down the loan.

Takedown or Draw-Down Risk in a Loan Commitment Exposes the FI