Quaker National Bank Case Study

Since they have a higher credit risk and liquidity risk, they should decrease their liabilities and put up funds through the earning asset. Second is that Quaker National Bank shall match the assets and liabilities of Quaker Bank. Interest rates are due to change every time hence when one is matching assets and liabilities the Interest rates of each period should be considered thus required.

But when Quaker National Bank will not be able to match their assets and liabilities, they an mitigate the risk of economic loss arising from changes In the value of the underlying which is known as hedging.

The chosen alternative is the second one, to match the assets and liabilities of Quaker Bank. Interest rates are due to change every time hence when one is matching assets and liabilities the interest rates of each period should be considered thus required. But when Quaker National Bank will not be able to match their assets and liableness, they can mitigate the risk of economic loss Orleans from changes In the alee of the underlying which is known as hedging.

The changes of the hedging instrument (derivate) and the hedged item compensate each other. Alternatively, derivatives can be used by investors to increase the profit arising if the value of the underlying moves in the direction they expect, bearing extra risk by speculations.

Financial institutions require some obligations of making future payments hence protection through matching. Quaker Bank should also pay out (allowably) at a more Dovetailed tell In order to Aviva losses.