Which of the following statements regarding liquidity risks and liquidity policy are least accurate?
- Funding liquidity risk is the difficulty or inability of a bank to offset or liquidate a position at the market price due to the absence of market depth or the presence of unfavorable market conditions.
- Market liquidity risk is the inability of a bank to meet its cash flow and collateral obligations with immediacy, resulting in economic loss or disruption in daily operations.
- A bank’s liquidity risk tolerance (and management) policy is established by senior management.
- To ensure a proper level of diversification among funding providers a bank should obtain funds from different maturity levels, for instance, short and long term funding.
A. II, III and IV.
B. I, III and IV.
C. I, II, III and IV.
D. I, II and III.
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