Brokers are exposed to inventory risk since they facilitate transactions on behalf of their clients while dealers are subject to capital risk because they must finance their inventories of securities.

Question

Quizplus · Accepted Answer

Brokers are not exposed to inventory risk as they do not hold securities; they facilitate transactions. Dealers, however, are exposed to inventory risk as they hold and trade securities, which can fluctuate in value.

Brokers Are Exposed to Inventory Risk Since They Facilitate Transactions