which of these is a measure of the sensitivity of a stock or portfolio to market risk? course hero

by Kirk Hermiston 7 min read

What is sensitivity to market risk?

Created by ECPtestPREP Terms in this set (57) What is Sensitivity to Market Risk? It is the degree to which CHANGES IN MARKET RATES or PRICES, such as interest rates, foreign exchange rates, commodity prices, or equity prices CAN ADVERSELY AFFECT the bank's earnings, capital and liabilities subject to market risk.

What is market risk in banking?

It is the degree to which CHANGES IN MARKET RATES or PRICES, such as interest rates, foreign exchange rates, commodity prices, or equity prices CAN ADVERSELY AFFECT the bank's earnings, capital and liabilities subject to market risk.

What is the market risk line?

Similar to the Capital Market Line except risk is characterized by beta instead of standard deviation. Market Risk Line Probability Market Line Security Market Line Stock Market Line security market line This is a measure summarizing the overall past performance of an investment.

What does it mean when a bank has a risk management rating?

This rating indicates control of market-risk SENSITIVITY NEEDS IMPROVEMENT or there is SIGNIFICANT POTENTIAL the EARNINGS performance or CAPITAL position will be ADVERSELY AFFECTED. RISK MANAGEMENT PRACTICES NEED TO BE IMPROVED given the size, sophistication, and level of market risk accepted by the bank.

What is a measure of the sensitivity of a stock or portfolio to market risk?

Beta measures the sensitivity of a stock's returns to fluctuations in the market portfolio.

Which of these is a measure of the sensitivity of a stock or portfolio to market risk quizlet?

Beta measures a stock's sensitivity to market risks. A stock's beta measures the: a. average return on the stock.

What is beta a measure of?

Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).

What is beta sensitivity?

The beta of a stock or portfolio will tell you how sensitive your holdings are to systematic risk, where the broad market itself always has a beta of 1.0. High betas indicate greater sensitivity to systematic risk, which can lead to more volatile price swings in your portfolio, but which can be hedged somewhat.