Explanation:
Asset/liability maturity (mismatch) risk refers to the purchase of long-term assets through short-term financing. Banks used commercial paper and repurchase agreements to finance the purchase of long-term assets. Securitization, not asset/liability maturity mismatch management, refers to risk transference through asset securitization. The subprime mortgage crisis reached its peak in June and July 2007.
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Question 59
A risk analyst is explaining the causes that led to the 2007–2009 financial crisis. Which of the following statements made by the analyst regarding the corresponding banking industry trends is correct?
A
Asset/liability maturity (mismatch) risk refers to the purchase of long-term assets through short-term financing.
B
Banks use commercial paper and long-term bonds to finance the purchase of long-term assets.
C
Asset/liability maturity (mismatch) management refers to risk transference through asset securitization.
D
The subprime mortgage crisis reached its peak in June and July 2009.
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