Escolar Documentos
Profissional Documentos
Cultura Documentos
e
|
|
.
|
\
|
e
e e Optimization of asset share
is conditional on CBC
liquidation, repo scenario for
the asset
- Cheapest CBC portfolio
- Absolute mismatch constraints
- other constratints e.g., tail
mismatch constraints
Optimizing the counterbalancing capacity portfolio*
Find the (cheapest) CBC portfolio holdings (cash flows) that best replicates the (negative) Net
Funding Requirements (NFR)
-max(-NFR,0)
Optimal CBC
31
Copyright 2011, SAS Institute Inc. All rights reserved.
Agenda
A New Regulation for Liquidity Risk
A new regulation based on learnings in the recent crisis
New reporting and liquidity monitoring standards
Short-term stress testing of liquidity coverage ratios
Long-term structural liquidity mismatch measurement - net stable funding ratios
Liquidity risk monitoring tools
Modeling Cash Flows for Liquidity Risk
Traditional run-off liquidity gaps
Behavior modeling of net cash flows
Counterbalancing capacity of unencumbered assets
Stress testing and liquidity coverage ratios
Pricing Liquidity Risks
Mismatch (term) liquidity risk
Contingency liquidity risk
Market liquidity risk
Funds transfer pricing of liquidity risk
Preparing for Liquidity Crisis Contingency Funding Plans
A Note on Advanced Liquidity Risk Management Techniques
Probabilistic measures and limits on liquidity risk
Optimising the counterbalancing capacity portfolio
Wrap Up and Summary
32
Copyright 2011, SAS Institute Inc. All rights reserved.
Wrap Up and Summary
The new [Basel III] liquidity risk regulation impose
significant challenges to banks of enhancing existing
liquidity measurement and management methods
Compliance requires
banks to take a sophisticated scenario based approach to
liquidity risk measurement and management
The establishment of scenario and risk based limits on
liquidity risk
Continous management of the dedicated CBC portfolio
Cost efficient portfolio
Policies and procedures to be implemented/reviewed (e.g.,
monitoring, CFP)
Best liquidity portfolio execution plan
Implementation of a pricing system for liqudity risk that
decentralizes the incentives for raising liquidity
33
Copyright 2011, SAS Institute Inc. All rights reserved.
References
Books and papers
Chen, W, and Skoglund, J, 2011. Cash Flow Replication with Mismatch Constraints. Forthcoming, Journal of Risk
Chen, W and Skoglund, J, 2011. Optimal Portfolio Strategy with Liquidity Capacity, Working paper
Chen, W, and Skoglund, J, 2011. Building a Project Plan for Liquidity Execution. Working Paper
Dev, A. and R, Vandana, 2006. Performance Measurement in Financial Institutions in an ERM Framework. Risk Books.
Matz, L. and P, Neu, ed. 2007. Liquidity Risk Measurement and Management. John Wiley
Moodys . 2001. How Moodys Evaluates US Bank and Bank Holding Company Liquidity.
Skoglund, J and Mathur, S, 2011. Liquidity Risk Management After the Crisis, a SAS white paper.
Skoglund, J., 2010. Funds Transfer Pricing and Risk-Adjusted Performance Measurement, a SAS white paper
Basel Committee
2008 Principles for sound liquidity risk management and supervision
2009 Strengthening the resilience of the banking sector
2009 International framework for liquidity risk measurement, standards and monitoring
2009 Principles for sound stress testing practices and supervision
2011 Basel III: A global regulatory framework for more resilient banks and banking systems
Senior Supervisors Group
2008 Observations on risk management practices during the recent market turbulence
Financial Stability Forum
2008 Enhancing market and institutional resilience
Institute of International Finance
2008 Final report of the IIF committee on market best practices
Copyright 2011, SAS Institute Inc. All rights reserved.