Vrije Universiteit
Faculty of Economicsand BusinessAdministration
Exam:
FinancialMarkets and Institutions
(Code:60442080)
Dr. A.H. Siegmann
March 25,2008
12.00- 14.45hrs
o The durationof the examis 2:45 hours
o This examconsistsof20 openquestions;
o Eachquestionsis markedwith 5 points.Ma:<imumcreditsto score100;
o Gradeswill be announced
on TuesdayApril 15,2008;
r Theexammay be reviewedon FridayApril 18,2008; I1.00- 12.00hrs,room lA-29.
, ExamFinancial - March25,2008
Marketsand Institutions
Provide brief, but well-reasonedanswers
1. Show,usingtheISLM andaggregate demand framework, whattheimpactof a demand shockby
governmentspending is onoutput,pricelevelsandinterest
rates.Discuss
bothshorttermand
(equilibrium)
long-term effects.
2. Forwhatreasons
doestheECBnothaveaninflationtargetof ïYo?(namethree)
fromanassetpricebubble/ assetpriceinflation
3. Namethreerisksresulting
4. Givethreereasons
whyit is difficultfor centralbanksto actonassetpriceinflation
5. Theliterature
onfinancialintegration
usesdifferentmeasures.
Oneof thesemeasures
is calledthe
news-basedmeasure.
a. Givetheformulafor thenews-based measure andexplaintheparameters.
b. Whatdoesa beta(9) of I imply?
6. Give four possibleexplanationsfor the occuranceof contagionin exchangerate
movements
7. Whatfour optionsdoesa bankhavein caseof a liquidity shortfall?Give a motivated
rankingof eachalternativein termsof costs(increasingorder).
8. How is the effectof disintermediation
visiblefor US banks?What is the threat?
9. Explainthe threepillarsof BaselII
10. Givethe threeargumentsfor prudentialregulationof banks.
11.Besidesthe maturitiesof the loans,whatarethe four inputsnecessary for computing
creditrisk for a bank?Give the abbreviationaswell asthe interpretation.
12.In his lecture,prof. Bakkersuggestedthat theNetherlandscouldbe seenas 'switzerland
at theNorth Sea'.This correspondsto observationsmadeearlierin the lectureseries,that
the Dutchfinancialsectoris special.Givethe 3 reasonswhy this is the case.
Faculty of Economicsand BusinessAdministration
Exam:
FinancialMarkets and Institutions
(Code:60442080)
Dr. A.H. Siegmann
March 25,2008
12.00- 14.45hrs
o The durationof the examis 2:45 hours
o This examconsistsof20 openquestions;
o Eachquestionsis markedwith 5 points.Ma:<imumcreditsto score100;
o Gradeswill be announced
on TuesdayApril 15,2008;
r Theexammay be reviewedon FridayApril 18,2008; I1.00- 12.00hrs,room lA-29.
, ExamFinancial - March25,2008
Marketsand Institutions
Provide brief, but well-reasonedanswers
1. Show,usingtheISLM andaggregate demand framework, whattheimpactof a demand shockby
governmentspending is onoutput,pricelevelsandinterest
rates.Discuss
bothshorttermand
(equilibrium)
long-term effects.
2. Forwhatreasons
doestheECBnothaveaninflationtargetof ïYo?(namethree)
fromanassetpricebubble/ assetpriceinflation
3. Namethreerisksresulting
4. Givethreereasons
whyit is difficultfor centralbanksto actonassetpriceinflation
5. Theliterature
onfinancialintegration
usesdifferentmeasures.
Oneof thesemeasures
is calledthe
news-basedmeasure.
a. Givetheformulafor thenews-based measure andexplaintheparameters.
b. Whatdoesa beta(9) of I imply?
6. Give four possibleexplanationsfor the occuranceof contagionin exchangerate
movements
7. Whatfour optionsdoesa bankhavein caseof a liquidity shortfall?Give a motivated
rankingof eachalternativein termsof costs(increasingorder).
8. How is the effectof disintermediation
visiblefor US banks?What is the threat?
9. Explainthe threepillarsof BaselII
10. Givethe threeargumentsfor prudentialregulationof banks.
11.Besidesthe maturitiesof the loans,whatarethe four inputsnecessary for computing
creditrisk for a bank?Give the abbreviationaswell asthe interpretation.
12.In his lecture,prof. Bakkersuggestedthat theNetherlandscouldbe seenas 'switzerland
at theNorth Sea'.This correspondsto observationsmadeearlierin the lectureseries,that
the Dutchfinancialsectoris special.Givethe 3 reasonswhy this is the case.
