Financial Risk Manager Part 2
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In the context of a quantitative risk analyst incorporating market liquidity into a bank's Value at Risk (VaR) model, which statement best describes the likely impact of market liquidity fluctuations on the liquidity horizon and the bank's credit risk exposure?
In the context of a quantitative risk analyst incorporating market liquidity into a bank's Value at Risk (VaR) model, which statement best describes the likely impact of market liquidity fluctuations on the liquidity horizon and the bank's credit risk exposure?
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A
If market liquidity decreases, the liquidity horizon will shorten, and the credit risk exposure will increase.
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B
If market liquidity decreases, the liquidity horizon will lengthen, and the credit risk exposure will increase.
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