Question

The intermediation, which deals with issuing indirect financial claims to savers that are readily exchangeable, while accepting relatively less exchangeable direct customers from investors, is called _______.
1. default intermediation
2. maturity intermediation
3. liquidity intermediation
4. value intermediation

Answer 1

Correct Answer - Option 3 : liquidity intermediation

The correct answer is liquidity intermediation.

• The process by which allocation of funds is done is called financial intermediation.
• The intermediation, which deals with issuing indirect financial claims to savers that are readily exchangeable, while accepting relatively less exchangeable direct customers from investors, is called liquidity intermediation.
  • It is the attempt made by banks to generate returns through liquidity mismatches between assets and liabilities.
  • Liquidity transformation is one of the bank’s core functions.
• Intermediaries help create efficient markets and lower the cost of doing business.
• Maturity intermediation is the process of making long-term loans on funds borrowed at short-term interest rates.