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Which among the following are shortfalls of the static liquidity ladder model? I. The static model gives a liquidity estimate only after the bank faces the liquidity problem. II. The static model can only make projections over a few days. III. The static model does not incorporate uncertainty in the analysis.
Correct Answer: C
* I. The static model gives a liquidity estimate only after the bank faces the liquidity problem: * This statement is true because the static liquidity ladder model does not predict future liquidity needs, it only assesses current liquidity status. * II. The static model can only make projections over a few days: * This statement is true as static models are typically used for short-term liquidity assessment. * III. The static model does not incorporate uncertainty in the analysis: * This statement is true because the static model does not consider the variability or uncertainty in future cash flows or obligations. Therefore, all the statements I, II, and III are correct about the shortfalls of the static liquidity ladder model. References:The references align with the documented limitations of static liquidity models in financial risk management literature.