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The investment function in fin-services management - Coggle Diagram
The investment function in fin-services management
Maturity management tools
Duration
The yield curve
Factor affecting choice of investment secs
Expected rate of return
Business risk
Tax exposure
Credit risk
IR risk
Liquidity risk
Call rick
Repayment rush
Inflation risk
Instrument available to fin firm
Money market instruments reach maturity within 1y low risk, ready marketability ( t- bills, CDs, short-term t-notes and bonds,...)
Others: structured notes, securities assets, stripped secs
Capital market instruments maturity beyond 1y higher expected rates of return capital gain potential ( T - notes and bonds ) 1y maturity municiple (corp). notes bands and. assets backed secs
Function of a bank's security portfolio
Reduce tax exposure
Provide backup source of liquidity
Serve as collateral
ProvideGeographic diversification
Hedge against ilr risk
Offset Credit risk exposure
Provide flexibility
Stabilize the bank's income
Dress up a bank's balance sheet
Investment maturity strategies
The rate expectation approach
The ladder policy
The barbell strategy
The front-end policy
The back-end load maturity policy