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Portfolio (Financial-Asset) Decisions by Financial Institutions A number of factors affect the making of portfolio decisions – deciding what financial assets to buy or sell. The relative rate of return and risk attached to different financial assets. The cost, volatility, and maturity of incoming funds provided by surplus-budget units. Hedging principle – the approximate matching of the maturity of financial assets held with liabilities taken on. Portfolio (Financial-Asset) Decisions by Financial Institutions The size of the individual financial institution. Larger financial institutions tend