课后题答案.docx

课后题答案.docx

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课后题答案

第一章

1.Foralargebank,assetsconsistapproximatelyofmarketablesecurities（20%）,loans（70%）,andotherassets（10%）.Liabilitiesconsistofcoredeposits（40%‑60%）,noncore,purchasedliabilities（20%‑40%）,andotherliabilities（5%‑10%）asafractionofassets.

Smallbankstypicallyobtainmorefundsintheformofcoredepositsandlessintheformofnoncore,purchasedliabilities.Smallbanksofteninvestmoreinsecuritiesaswell.Ofcourse,theactualpercentagesforanybankdependonthatbank’sbusinessstrategy,marketcompetition,andownership.

2.Abank'sinterestincomeconsistsofinterestearnedonloansandsecuritieswhilenoninterestincomeincludesrevenuesfromdepositservicecharges,trustdepartmentfees,feesfromnonbanksubsidiaries,etc.

Interestexpenseconsistsofinterestpaidoninterest-bearingcoredepositsandnoncoreliabilitieswhilenoninterestexpenseiscomprisedofoverheadcosts,personnelcosts,andothercosts.

Abank’snetinterestincomeequalsitsinterestincomeminusinterestexpense.Notethatinterestincomemaybecalculatedonatax‑equivalentbasisinwhichtax‑exemptinterestisconvertedtoitspre‑taxequivalent.

Abank’sburdenisdefinedasitsnoninterestexpenseminusnoninterestincome.Thisisoftenquotedasafractionoftotalassets.

Abank’sefficiencyratioiscalculatedasnoninterestexpensedividedbythesumofnetinterestincomeandnoninterestincome.Thedenominatoreffectivelymeasuresnetoperatingrevenueaftersubtractinginterestexpense.Theefficiencyratiomeasurethenoninterestcostper$1ofoperatingrevenuegenerated.Analystsofteninterprettheefficiencyratioasameasureofabank’sabilitytocontroloverheadrelativetoitsabilitytogeneratenoninterestincome（andoverallrevenue）.Alowernumberispresumablybetterbecauseitreflectsbettercostcontrolcomparedwithrevenuegeneration.

4.Theprimaryriskfacedbybanksarecreditrisk,liquidityrisk,interestraterisk,foreignexchangerisk（thelattertworepresentmarketrisk）,operationalrisk,andcapitalsolvency.Ingeneral,promised,orexpected,returnsshouldbehigherforbanksthatassumeincreasedrisk.Thereshouldalsobegreatervolatilityinreturnsovertime.

a.Creditrisk:

Netloancharge‑offs/Loans

Highrisk‑highratio;Lowrisk‑lowratio

Highriskmanifestsitselfinoccasionalhighcharge-offs,whichrequiresaboveaverageprovisionsforloanlosssestoreplenishtheloanlossreserve.Thus,netincomeisvolatileovertime.

b.Liquidityrisk:

Coredeposits/Assets

Highrisk‑lowratio;Lowrisk‑highratio

Highriskmanifestsitselfinlessstablefundingasabankreliesmoreonnoncore,purchasedliabilitiesthatfluctuateovertime.Thesenoncoreliabilitiesarealsohighercost,whichraisesinterestexpense.

c.Interestraterisk:

（|Repriceableassets‑repriceableliabilities|）/Assets

Highrisk‑highratio;Lowrisk‑lowratio

Highriskbanksdonotcloselymatchtheamountofrepriceableassetsandrepriceableliabilities.Largedifferencessuggestthatnetinterestincomemayvarysharplyovertimeasthelevelofinterestrateschanges.

d.Foreignexchangerisk:

Assetsdenominatedinaforeigncurrencyminusliabilitiesdenominatedinthesameforeigncurrency.

Highrisk–alargedifference;Lowrisk–asmalldifference

Highriskmanifestsitselfwhenexchangerateschangeadverselyandthevalueofthebank’snetpositionofassetsversusliabilitiesdenominatedinacurrencychangessharply.

e.Operationalrisk:

totalassets/numberofemployees

Highrisk–lowratio;Lowrisk–highratio

Highriskmanifestsitselfwhenthebankoperatesatlowproductivitymeasuredbymoreemployeesperamountofassets

f.Capital/solvencyrisk:

Stockholders’equity/Assets

Highrisk‑lowratio;Lowrisk‑highratio

Highriskmanifestsitselfbecausefewerassetsmustgointodefaultbeforeabankisinsolventandcanbecloseddownbyregulators.

7.CAMELS

a.C=capitaladequacy:

equity/assets

b.A=assetquality:

nonperformingloans/loans;loancharge‑offs/loans

c.M=management:

nosingleratioisgood,althoughallratiosindicateoverallstrategy

d.E=earnings:

aggregateprofitratios;ROE,ROA,netinterestmargin,burden,efficiency

e.L=liquidity:

coredeposits/assets;noncore,purchasedliabilities/assets;marketablesecurities/assets

f.S=sensitivitytomarketrisk;|repriceableassets-repriceableliabilities|/assets;differenceinassetsandliabilities

denominatedinthesamecurrency

8.Lowesttohighestliquidityrisk:

3‑monthT‑bills,

5‑yearTreasurybond,

5‑yearmunicipalbond（ifhighqualityandfromaknownissuer）,

4‑yearcarloanwithmonthlypayments（receivesomeprincipalmonthly,maybesaleable）,

1‑yearconstructionloan,

1‑yearloantoindividual,

pledged3-monthT-bill.Asstated,the3‑monthT‑billthatispledgedascollateralisilliquidunlessthebankcanchangeitscollateralstatus

9.Comparativecreditrisk

a.loantoacomergrocerystorerepresentingalittleknownborrowerwithuncertainfinancials

b.loancollateralizedwithinventory（workinprocess）becausethecollateralislessliquidandmoredifficulttovalue;thisassumesthatthereceivablesarestillviableandnottooaged.

c.normallytheBa‑ratedmunicipalbond,unlesstheagencybondisan"exotic"mortgagebackedsecurity,becausetheagencybondcarriesanimpliedguaranteeinthatFreddieMacisaquasi-publicborrower.

d.1‑yearcarloanbecausethestudentloanistypicallygovernmentguaranteed

第三章

2.

Theprimarysourcesofnoninterestincomeforacommunitybankaregenerallydepositfees,trustfees,mortgagefees,feesandcommissionsandfeesfrominsuranceproduces,creditcardfeesandinvestmentproductfees.

TheprimarysourcesofnoninterestincomeforlargeGlobal,Nationwide,andSuperRegionalBanksaredepositfees,investmentbankingfees,assetmanagementfees,mortgageservicingfees,andtradingprofits.

3.Noninterestexpenseconsistsofpersonnelexpense,occupancyexpense（includingrentanddepreciation）,andotherexpenseforsupplies,depositinsurance,etc.

4.

Theefficiencyratioismeasuredasnoninterestexpensedividedbythesumofnetinterestincomeandnoninterestincome（totaloperatingrevenue）.Assuch,itmeasureshowmuchitcostsinoverheadtogenerate$1ofrevenue.Alowerfigureindicatesthatabankismoreefficientbecauseittakeslessoverheadtoproduce$1ofrevenue.

Itmaynotbeameaningfulmeasurebecauseitprovidednoinformationregardingwhetheraspecificexpenditureisappropriate.Specifically,ifanexpenditurewon’tproducerevenueforseveralyears,itmayincreasetheefficiencyratiosuggestingthatitisnotappropriate,whenactualsavingsorrevenuegeneratedisdelayedandtheexpendituremightbeanattractiveone.

第四章

2.Ratesensitiveassets:

yes‑matures

yes‑maturesdaily

no-principalisreceivedafter6months;couponinterestisnotabalancesheetitem,soisnotincludedaseitheraratesensitiveassetorliability

yes,aportionisratesensitiveeachmonth-thepartialprincipalpaymentsduringthefirst6monthsareratesensitive.

yes/no–dependingonwhethertheprimeratechangeswithin6months.Iftheprimeratechangeswithin6months,thefullamountofloanprincipalisratesensitive.Iftheprimeratedoesnotchange,nothingisratesensitive.Lookingforward,theanalystmustforecastwhetherprimewillchangetoassigntheprincipalamounttoaspecifictimeinterval.

4.GAPcomparisons

a.CountyBankCityBank

3‑monthGAP-$10$0

6‑monthGAP-$10-$10

1‑yearGAP$0-$10

3‑month:

CountyBank;6‑month:

same;1‑year:

CityBank

Tobestassessrisk,onemustselecttimeintervalsthatdifferentiatethetrueeffectiverepricingfrequencyofassetsversusliabilities.

5.

TargetGAP

=[（0.10）（.048）/（.02）]$400

=+/-$96

第五章

2.LowcouponbondshavelongerMacaulay’sdurationsbecauseaninvestorhastowaitlonger

toreceiveanycashflow.Withacouponbond,aninvestorreceivesinterimcouponpaymentsbeforefinalmaturity.BecauseMacaulay’sdurationequalstheweightedaverageoftimeuntilthecashflowsarise,wheretheweightsarethepresentvaluesofeachcashflowasafractionofthesecurity’sprice,instrumentswithinterimcashflowswillhaveadurationoflessthanfinalmaturity.TheMacaulay’sdurationofazerocouponinstrumentisfinalmaturity.

3.Thereisinterestrateriskwiththistransaction.Theliabilityisazerocoupondepositthatpaysallinterestandprincipalatmaturityin5years.Thus,theMacaulay’sdurationofthedepositis5years.Theloanamortizesover5yearswithmonthlypaymentsofprincipalandinterest.Thus,theMacaulay’sdurationoftheloanislessthan5years.Thedurationgapforthistransactionisnegativebecausetheliabilitydurationislongerandtheeffectiveliabilitytoassetratioequalsone.Ifinterestratesrise（fall）,themarketvalueofthedepositwillfall（rise）morethanthemarketvalueoftheloansuchthatthemarketvalueofequityrises（falls）.

5.TheobjectiveistoreduceriskwithDGAP>0.

Thistransactionincreasesriskbecausetheassetdurationislongerthantheliabilityduration.

Thistransactiondecreasestheaveragedurationofassets.Ifdoneintherightmagnitude,itmaymoveDGAPclosertozeroandthusreducerisk.

Thistransactionusesalongerdurationliabilitytoacquireashorter-durationasset.Togetheritreducesthebank’sDGAPandlikelymovesitclosertozero.Thus,riskisreduced.

第六章

1.Liquidityrisk（lowtohigh）:

DDAs,NOWs,MMDAs,smalltimedeposits,FederalHomeLoanBankadvances,jumboCDs,Eurodollarliabilities,federalfundspurchased

Cost（lowtohigh）