Question

Larger firm borrow a significant fraction of their debt from lenders rather than bond markets who provide them informationally intensive financial services

The choice of the holding period in the VAR model should partly depend on market liquidity. If markets are very liquid you can rely on short holding periods because the firm will be able to liquidate its risky positions quickly.

True or fALSE  questions

Answer 1

1) False, Larger firm borrow a significant fraction of their debt from bond markets rather than lenders because it is a cheaper source of finance and the duration of borrowing is in the hands of the borrower.

2) True, although  The choice of the holding period in the VAR model depends on how the resultatnt VAR is used but it should partly depend on market liquidity. If markets are very liquid you can rely on short holding periods because the firm will be able to liquidate its risky positions quickly.