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Incentives and Stakeholder Behavior
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GMAT
VR.103 Incentives and Stakeholder Behavior
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Banks are evaluated for a stress test using the assets shown on the final day of each quarter. Regulators rarely examine daily positions during the rest of the quarter. Which response is most likely?
A
Banks will increase reported risk only on the measurement date because lower risk worsens the test.
B
Some banks will temporarily reduce risky positions near quarter-end and rebuild them after the measurement date.
C
Quarter-end assets will necessarily represent average risk throughout the quarter.
D
Regulators' focus on one date will eliminate any benefit from timing transactions.
E
Banks will stop managing assets between quarter-ends.
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