Which of the following contingent risks are most likely to be created if a bank provides a loan commitment?
A)interest rate risk and credit risk
B)draw-down risk
C)aggregate funding risk
D)All of the listed options are correct.

Question

Quizplus · Accepted Answer

A loan commitment creates potential risks for the bank, including interest rate risk (if the interest rate changes before the loan is disbursed), credit risk (if the borrower cannot repay the loan), draw-down risk (if the borrower decides not to draw down the full amount of the loan), and aggregate funding risk (if the bank cannot secure enough funding to fulfill all of its commitments). Therefore, all of the listed options are correct.

Which of the Following Contingent Risks Are Most Likely to Be