medium · Frm Part 2 Liquidity & Treasury Risk
A bank observes that its 'Basis Risk' in the banking book is increasing.
Which of the following scenarios best illustrates this risk subspecies?
- Mortgage borrowers refinance their loans as interest rates fall.
- A parallel shift in the yield curve reduces the economic value of equity.
- Assets linked to SOFR and liabilities linked to administered retail deposit rates reprice differently.
- The bank holds 10-year fixed-rate assets funded by overnight deposits.
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