Lectures_4_5 @eng

The sovereign-bank nexus is based on the ...... guarantee offered by the gov't to bail out banks

• implicit

• explicit

The "global financial cycle" can easily explain the recent ...

• divergence in policy uncertainty

• convergence in financial risk

• divergence in financial uncertainty

"Waiting to invest" has a value mainly because investment ...

• is partly irreversible

• has uncertain returns

• easily becomes obsolete

Leverage is capped by regulators for ...

• HFs

• SWFs

• banks

• all

Investment banks usually increase their leverage (Assets/Equity) ...

• by raising debt faster than assets

• by raising equity faster than assets

Financial markets .... effects of uncertainty on real economic variables

• amplify the asymmetric

• attenuate the symmetric

• increase the symmetric

HFs managers usually keep ...

• low betas against the market

• low leverages

• constant AUMs

• strategies constant in volatile markets

The pro-cyclical behaviour of financial intermediaries implies that ....

• banks expand credit when stock markets raise

• banks expand credit when credit risk is raising

• stock markets drop when credit risk reduces

Diversification .... the cross-sectional correlation between individual portfolios, leading to ..... systemic risk

• raises & higher

• decreases & higher

• raises & lower