- 20 Marks
BO – April 2023 – L3 – Q2 – Securitization, Funds Transfer Pricing, and Net Open Position
Explain securitization and its benefits, describe funds transfer pricing in ALM, and detail net open position including long/short positions from a balance sheet view.
Question
a) One strategy that companies adopt to manage their cashflows is Securitization. Briefly explain the concept of Securitization. [5 marks]
b) What benefits do companies derive from undertaking securitization transactions? [10 marks]
c) Briefly explain the concept of Funds Transfer Pricing in the ALM process. [5 marks]
d) Section 41 of the Banks and Specialized Deposit-Taking Institutions Act 2016, Act 930 requires banks to maintain a Net Open Position as may be prescribed by the Bank of Ghana.
i) Explain Net Open Position from the balance sheet perspective. [5 marks]
ii) Explain Long and Short positions with respect to Net Open Position and explain the expectations of holders of these positions. [5 marks]
[Total: 30 marks]
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