Financial Risk Manager Part 2

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Which of the following statements describes the best approach for liquidity transfer pricing?

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A

Zero cost of funds approach is preferred in cases in which swap rates are unknown and undeterminable.

B

The pooled average cost of funds approach is more appropriate for banks with numerous business units.

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C

The separate average cost of funds approach is preferred to accurately account for business units with large trading activities.

D

The matched-maturity marginal approach is preferred because it quantifies liquidity risk premiums across all maturities.

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