Exam 14: Off-Balance Sheet Activities

Packaging of loans into large pools and issuing securities to investors is called:

A revolving loan commitment is an agreement between a bank and a customer that the bank will entertain a request for a loan from the customer and in most cases the bank will make the loans even though they are not obligated to do so.

Banks and securities firms established the International Swaps Dealers Association (ISDA).

A risk that a bank has with futures contracts but not forward contracts is:

A material adverse change (MAC) clause prohibits the bank from withdrawing its commitment under certain conditions.

A NIF organized into a group of 15 or more banks and financial institutions is known as the arranger.

Buying a forward rate agreement is analogous to:

With respect to SLCs, liquidity risk and funding risk are similar concepts.

A commitment fee on a revolving loan commitment is often referred to as a facility fee.

Banks and securities firms established the International Swaps Dealers Association to promote:

A swap that involves the exchange of loan interest and principal between two banks is a:

The risk that the price of a derivative security will change is called:

Standby letters of credit are most commonly used as:

A line of credit is:

Firms face markup risk, which is associated with the premium added on the reference rate (e.g., prime rate) to compensate the bank for risk.

An agreement between two counterparties to exchange cash flows is called a(n):

Cash management systems for business concerns are NOT an off-balance-sheet activity of banks.

Letters of credit:

A floor agreement is considered "in-the-money" when the:

To create a synthetic loan with a fixed rate, a bank with a variable rate loan outstanding can: