(i) Clearly describe the following terms used in relation to credit risk analysis:
(a) Expected Loss;
(b) Credit risk drivers;
(c) Affirmative covenants
(ii) Having describeed the Three Main Pillars of Basel II, critically describe the significance of Basel II guidelines in reducing banking risks.
(i) Assess in what ways credit risk can migrate to other risks in banking.
(ii) After giving a concise description of Securitization mechanisms, critically consider the costs and benefits of Securitization.
(i) What do you understand by the terms?
(a) Liquidity risk
(b) Liquidity Gaps
(ii) Having describeed the meaning of systemic risk, assess whether or not derivative instruments reduce systemic risk.