Failure Mechanics of Dealer Banks von Edu Pristine

Dozent des Vortrages Failure Mechanics of Dealer Banks

Edu Pristine

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... number of functions including: Act as an intermediary for OTC derivatives, repos and other securities Prime brokers for hedge funds and wealth ...

... Dealer banks finance a large portion of other dealer banks assets through repos. Dealer banks would finance holdings with little incremental capital High leverage can cause significant solvency risk when the banks solvency is questioned. This creates a ripple effect and greatly increases ...

... clients exit their current positions and enter into new ones to hedge their risks. If their solvency is questionable then a hedge fund might demand a cash margin loans from the dealer that is backed by securities.The dealer then may not be able to raise cash by ...

... primary markets they act as underwriters for issuers and sell them to institutional and retail investors ?In the OTC derivatives markets they perform "matched books" dealer operations. In these ...

... information technology marketing and financial innovation. The recent financial crisis however pointed to some obvious disadvantages of financial conglomerates. Issues regarding risk management and corporate governance has cropped up in recent times. Also the ability of management ...

... second dealer bank. This can not only lead to a stress in the liquidity position but also reduce the franchise value and the reputation capital of the dealer bank In case of Bear Sterns the request was denied as concerns were raised regarding the solvency of the bank. A central clearing counterparty is an effective ...

... assets through short -term repo agreements. If their solvency is questioned then they might not renew the contract. The repo creditors might require to sell the assets probably at a lower value - leading to litigations. The dealer bank could also not ...

... clearing customers who are credit worthy. But if the solvency is questionable then the bank might refuse to process the transaction. During the recent financial crisis JP Morgan Chase was able to offset their exposure using Lehman's cash and also refused to make cash payments during the day on Lehman transactions. This brought Lehman's balance below zero and they ...

... borrowers to repay the loan there might be solvency concerns. These solvency concerns could act as a self -fulfilling prophecy that results in a bank's failure. Dealer banks provide liquidity to a number of other dealer banks. They act as intermediaries in OTC derivative market and repo markets. When their solvency is questioned, counterparties can reduce their ...

... System and the Bank of England provided secured lending facilities when no other options were available. A tri-party repo utility has also been proposed as clearing banks limit their exposure to dealer banks whose solvency is questioned. Other suggestions include setting up ...

... is because lenders become too optimistic and overextend their credit in good times. Currency debasement and depreciation never happen at the same time when a country defaults. Countries can be severely affected if there is a lot of "hot" money floating in the economy Which of the above statements is incorrect. A. i B. ...

... depreciation both accompany a country's default. ...