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Answer: Implementing asset-liability management
**Correct Answer: C** **Explanation:** C is correct. Asset-liability management is a process used in managing banks' funding liquidity risk, with techniques including gap and duration analysis. This is important because maturity mismatches on banks' balance sheets (for example, if a bank funds longer-term loans using short-term deposits) can create risk for a bank if short-term interest rates rise faster than longer term rates. A is incorrect. Model risk managers/developers are responsible for building VaR models. VaR models are used to manage market risk. B is incorrect. Credit default swaps are used to hedge against counterparty risk, which is a form of credit risk. D is incorrect. Estimating loss given default is used to quantify credit risk.
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A newly hired treasury risk analyst at a large bank has been assigned to the team responsible for managing the liquidity risk of the bank. The analyst is reviewing the tasks that will be required as part of this function. Which of the following is most likely part of the treasury risk analyst's job duties?
A
Building VaR models
B
Purchasing credit default swaps
C
Implementing asset-liability management
D
Estimating loss given default
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