18-30 Managing liabilities as a means of managing liquidity risk involves the tradeoff between lower funding cost and higher risk of withdrawals.

Question

Quizplus · Accepted Answer

Managing liabilities refers to the process of acquiring and maintaining funds to meet the liquidity needs of a company. This involves a tradeoff between the cost of funding and the risk of withdrawals. Lower funding costs may come with high-risk withdrawals, while higher funding costs may come with lower risks of withdrawals. Managing liabilities effectively allows a company to balance these factors and maintain adequate liquidity while minimizing costs.

18-30 Managing Liabilities as a Means of Managing Liquidity Risk