Multiple choice

Find the appropriate word from the given options and fill blank (v).

Directions: The following passage has some blanks, each of which has been numbered. These numbers are printed below the passage and against each, five words are suggested, one of which fits the blank appropriately. 

The traditional method of managing credit risk is ____(i)____ diversification. Although ____(ii)____ credit risk through diversification is effective, institutions are often constrained by _____(iii)____ of diversification ____(iv)_____ on account of limited area of _____(v)_____. During the last few years, managing credit risk through selling assets by way of securitisation has _____(vi)_____ in popularity. The market for securitised assets has grown _____(vii)_____ in the last few years and is expected to grow further in the _____(viii)_____ years. This mode of credit risk mitigation is most _____(ix)_____ to loans with standardised payment schedules and similar credit risk characteristics such as housing loans, auto loans, credit card receivables, etc. Further, shedding loans through securitisation might _____(x)____ client relationship. In this context, credit derivatives provide a new technique for managing credit risk.

  1. place

  2. transaction

  3. operations

  4. dealing

Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Place, dealing and work are out of context. Transaction means 'conducting business', but here we are talking about implementing the process of diversification. So, the correct option is (3). The area is 'limited' for carrying out the diversification 'operation'.