Vol 4, Reading 23, EOC 27

[JJ1337]

I know there are several post about this in this forum. However, for my understanding…
The manager is also concerned about contingent claim risk, because the liability (financing the hospital) side might include callable or putable bonds?

 

[ov25]

I think contingent claim risk is a kind of liquidity demanding situation when undesired where the manager has to deal with situations of lucrative coupon halted or pricipal repaid when low interest rates etc (Ex: insurance portfolio manager experiences GIC are recalled when interest rates are high, MBS investor receives principal payments when low interest rates prevail etc)
you are right - the options in the contracts/bonds allow for contingent claim risk imo

 

[JJ1337]

Hm. Not fully convinced, but, yeah. Thanks

 

[Galli]

The person speaking about the risks the liability could possibly exhibit. The list is exhaustive, and thus, correctly states all of the risks potential the liability could have.

 

[JJ1337]

OK. Thanks. I focused too much on the asset side. :|