Liquidity risk arises from a bank's inability to meet its obligations. This document discusses various methods for measuring liquidity risk that were used before and after the 2008 global financial crisis. Before the crisis, models focused on bid-ask spreads, transaction volumes, and liquidity balances. Following the crisis, Basel III introduced two new ratios - the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) - to improve banks' short-term and long-term liquidity management. The LCR requires sufficient high-quality liquid assets to cover net cash outflows over 30 days, while the NSFR aims to ensure long-term assets are funded by stable sources over one year.
This presentation provides a highlight of the key issues in the management of Market Risk. It touches briefly some of the elements of the Basel 2 Accord with respect to Market Risk
This presentation provides a highlight of the key issues in the management of Market Risk. It touches briefly some of the elements of the Basel 2 Accord with respect to Market Risk
Given the recent financial crisis and the extended impact on global credit market and liquidity, it is imperative that financial institutions strengthen their market risk management capabilities to effectively meet compelling business objectives and challenges which include portfolio pricing and portfolio exposure management
Counterparty Credit Risk and CVA under Basel IIIHäner Consulting
Financial institutions which apply for an IMM waiver under Basel III need to fullfill a broad set of requirements. We present the quantitative, organizational and operational implications and provide some hand-on guidance how to fulfill the regulatory requirements.
Interest rate risk management for banks under Basel II, presentation by Christine Brown, Department of Finance , The University of Melbourne, Shanghai, December 8-12, 2008
Managing Credit Risk
• A major part of the business of financial institutions is making loans,
and the major risk with loans is that the borrow will not repay.
• Credit risk is the risk that a borrower will not repay a loan according
to the terms of the loan, either defaulting entirely or making late
payments of interest or principal.
• Concepts of adverse selection and moral hazard provides framework
to understand the principles that is used to minimize credit risk, yet
make successful loans.
Given the recent financial crisis and the extended impact on global credit market and liquidity, it is imperative that financial institutions strengthen their market risk management capabilities to effectively meet compelling business objectives and challenges which include portfolio pricing and portfolio exposure management
Counterparty Credit Risk and CVA under Basel IIIHäner Consulting
Financial institutions which apply for an IMM waiver under Basel III need to fullfill a broad set of requirements. We present the quantitative, organizational and operational implications and provide some hand-on guidance how to fulfill the regulatory requirements.
Interest rate risk management for banks under Basel II, presentation by Christine Brown, Department of Finance , The University of Melbourne, Shanghai, December 8-12, 2008
Managing Credit Risk
• A major part of the business of financial institutions is making loans,
and the major risk with loans is that the borrow will not repay.
• Credit risk is the risk that a borrower will not repay a loan according
to the terms of the loan, either defaulting entirely or making late
payments of interest or principal.
• Concepts of adverse selection and moral hazard provides framework
to understand the principles that is used to minimize credit risk, yet
make successful loans.
Stress Testing and the Impact that Over-Reliance on VaR as a risk metric in t...Conor Cooney
A Presentation on the Development of Stress Testing.
Demonstrating the impact that Risk Management Models had on the Great Recession and what lessons can be learned from it.
There is also a demonstration of an Irish example of a successful stress test, that was one of the fundamental focal points in the lead up to the state's exit from an IMF bailout programme
Tracking money and fund flows from one financial entity to another will lead to a long chain or network of entities spread all over the world. Along with the funds financial risks also flow across the network. They can have a devastating cascading effect when one entity collapses. The financial melt down of global markets in 2007-08 was precipitated by failure in such networks. We present the dimensions and complexity in modelling fund flows in these networks.
Illiquid collateral and bank lending in euro area - Barthelemy et al. (2017)Benoit Nguyen
Presentation slides for the paper 'Illiquid collateral and bank lending during the Euro sovereign debt crisis'. Full paper downloadable here: https://publications.banque-france.fr/en/illiquid-collateral-and-bank-lending-during-european-sovereign-debt-crisis
Interest rate risk management what regulators want in 2015 7.15.2015Craig Taggart MBA
Areas covered in this section
Why Interest Rate Risk (IRR) should not be ignored
• Forward Rate Agreements (FRA’s) Forwards, Futures
• Swaps, Options
Why Bank Regulators continue to have a poor handle on interest rate risk
• Interest Rate Caps, floors, Collars
• LIBOR and UBS & Barclays rigging rates
• How should Financial Institutions determine which IRR vendor models are appropriate?
IRR Measurement methodologies are institutions
“Have you ever experienced bouncing around in gigantic bubbles in the sky? Have you ever undergone the punishment of a crime you never committed? Or have you ever felt like you’ve met someone before, when in reality you haven’t even seen them ever?”
- – – I’m sure you have!
This is the presentation based on the article I wrote on Dreaming. You can have a look at the article to have a better understanding:
http://thoughtsintowords.hol.es/philosophy/thetheoryofdreaming/
http://thoughtsdecipheredintowords.blogspot.com/2014/12/the-theory-of-dreaming.html
You can also like my page for more reads:
https://www.facebook.com/thoughtsdecipheredintowords
Also, subscribe on my website if you like.
And, don't forget to share the work you like. That is one way to express your admiration.
Had a presentation today for the subject: History of Economic Thought.
The requirements were to present a theory with its historical background, its definition and practicality and implementation.
So, I researched for some historical theories and found out about this paradox presented by William Stanley Jevons. Go on, have a look, use it and increase the overall pleasure !
My Communication Skills instructor, Mrs. Rumessa Naqvi, gave us a lecture on how to give a presentation that is really knocks the audience out, "IN ALL THE GOOD WAYS". I noted all the points down and made this powerpoint file for the best of us all. Have a look! Boost utilitarianism.
A presentation that we made on our research for the Academic Writing course. The research was about the effects that TV violence has on children and ways to reduce it. Have a look. And if you'd also need the research paper, contact me on my facebook account.
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
what is the best method to sell pi coins in 2024DOT TECH
The best way to sell your pi coins safely is trading with an exchange..but since pi is not launched in any exchange, and second option is through a VERIFIED pi merchant.
Who is a pi merchant?
A pi merchant is someone who buys pi coins from miners and pioneers and resell them to Investors looking forward to hold massive amounts before mainnet launch in 2026.
I will leave the telegram contact of my personal pi merchant to trade pi coins with.
@Pi_vendor_247
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What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the telegram contact of my personal pi vendor to trade with.
@Pi_vendor_247
how to sell pi coins on Bitmart crypto exchangeDOT TECH
Yes. Pi network coins can be exchanged but not on bitmart exchange. Because pi network is still in the enclosed mainnet. The only way pioneers are able to trade pi coins is by reselling the pi coins to pi verified merchants.
A verified merchant is someone who buys pi network coins and resell it to exchanges looking forward to hold till mainnet launch.
I will leave the telegram contact of my personal pi merchant to trade with.
@Pi_vendor_247
The secret way to sell pi coins effortlessly.DOT TECH
Well as we all know pi isn't launched yet. But you can still sell your pi coins effortlessly because some whales in China are interested in holding massive pi coins. And they are willing to pay good money for it. If you are interested in selling I will leave a contact for you. Just telegram this number below. I sold about 3000 pi coins to him and he paid me immediately.
Telegram: @Pi_vendor_247
Resume
• Real GDP growth slowed down due to problems with access to electricity caused by the destruction of manoeuvrable electricity generation by Russian drones and missiles.
• Exports and imports continued growing due to better logistics through the Ukrainian sea corridor and road. Polish farmers and drivers stopped blocking borders at the end of April.
• In April, both the Tax and Customs Services over-executed the revenue plan. Moreover, the NBU transferred twice the planned profit to the budget.
• The European side approved the Ukraine Plan, which the government adopted to determine indicators for the Ukraine Facility. That approval will allow Ukraine to receive a EUR 1.9 bn loan from the EU in May. At the same time, the EU provided Ukraine with a EUR 1.5 bn loan in April, as the government fulfilled five indicators under the Ukraine Plan.
• The USA has finally approved an aid package for Ukraine, which includes USD 7.8 bn of budget support; however, the conditions and timing of the assistance are still unknown.
• As in March, annual consumer inflation amounted to 3.2% yoy in April.
• At the April monetary policy meeting, the NBU again reduced the key policy rate from 14.5% to 13.5% per annum.
• Over the past four weeks, the hryvnia exchange rate has stabilized in the UAH 39-40 per USD range.
US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
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Where can I sell my pi coins at a high rate.
Pi is not launched yet on any exchange. But one can easily sell his or her pi coins to investors who want to hold pi till mainnet launch.
This means crypto whales want to hold pi. And you can get a good rate for selling pi to them. I will leave the telegram contact of my personal pi vendor below.
A vendor is someone who buys from a miner and resell it to a holder or crypto whale.
Here is the telegram contact of my vendor:
@Pi_vendor_247
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
2. Introduction
• Liquidity risk arises from a bank’s inability to meet its
obligations when they come due without incurring
considerable losses (Ouma, 2015).
• Negatively influences earnings and the capital of the bank.
• Liquidity risk is the potential for loss to an institution,
arising from either its inability to meet its obligations or to
fund increases in assets as they fall due without incurring
considerable costs.
• Inability of a bank to liquidate its position without
unacceptable losses.
• Liquidity risk can be categorized into two major segments:
Funding liquidity concerns the ease with which a financial
institution can obtain funds.
Market liquidity is the ease with which a company can sell its
assets to obtain the required liquidity. Market liquidity risk
occurs when the assets are priced below their value and the firm
incurs losses while selling them.
3. Significance of liquidity risk
• The global financial crisis of 2007 was the biggest financial
crisis since the 1930s.
• Became the reason for regulators to emphasize on the
importance of liquidity as a key determinant of
performance for all the financial institutions.
• Before the meltdown in 2007 , the financial markets used to
be flexible and funding was readily available at low costs.
• The transition of the financial environment brought the
banking system under severe stress.
• Following this, Basel III was introduced which emphasized
on the maintenance of liquidity of global liquidity through
the introduction of two new ratios (LCR and NSFR).
• These were considered as the new regulations for
measuring liquidity risk.
4. Liquidity Measures before
BASEL III
More frequently discussed
• Add-on model with bid-ask-spread (1999)
• Transaction regression model (2000)
• Volume-based price impact (2001)
• Liquidity Balance (2003)
• Current Ratio and Liquidity Ratio
Others
• Nonperforming assets ratio
• Government securities ratio
5. Add-On Model With Bid-Ask-Spread
(1999)
• Bangia, Diebold, Schuermann and Stroughair (1999)
developed a simple liquidity adjustment of a Value At
Risk (VaR) measure based on bid-ask-spread.
• Liquidity cost is measured with the bid-ask-spread. To
determine risk as the worst achievable transaction
price, the worst bid-ask-spread is added to the worst
mid-price.
• The results suggested that ignoring liquidity risk can
produce substantial underestimates of overall risk,
particularly in emerging market securities.
6. Contd.
• L−V*aR = 1−exp(zσr) + (µS + ˆ zSσS)
• σr is the variance of the continuous mid-price return
over the appropriate horizon
• µS – Mean
• σS - variance of the bid-ask-spread.
• z is the percentile of the normal distribution.
• ˆ zS is the empirical percentile of the spread distribution
in order to account for non-normality in spreads.
7. Transaction Regression Model
(2000)
• Berkowitz (2000)
Pmid,t+1 −Pmid,t = C + θNt + xt+1 + ɛt
• C= constant
• θ= regression coefficient
• xt+1= effect of risk factors
• ɛt= error term
8. Volume-based price impact
• Cosandey (2001) established a simple framework to
estimate price impact from volume data
• The net return is then incorporated into the liquidity
adjusted value at risk model as
9. Liquidity Balance Approach
• Dutch regulation (2003)
LB = Available Liquidity – Required Liquidity
• Available liquidity = Available stock of high-quality
liquid assets + Cash inflow scheduled within the coming
month
• Required Liquidity = Stock of liquid liabilities + Cash
outflow scheduled within the coming month
10. Continued
• Haan and End (2012)
• Panel research
• Liquidity balance as measure of independent variable
liquidity risk
• Impact on financial performance of banks
11. Current and Liquidity ratios
• Current ratio measures a financial institution’s
capability to meet its short-term and long-term
obligations
• Liquidity ratio estimates the ability of the bank to pay
off its obligations quickly
• Ouma (2015) constructed a linear regression model for
43 commercial banks from the year 2010 to 2014
12. Continued
• The established model was:
• Y = β0 + β1X1 + β2 X 2+β3 X 3+ β4 X4 + ẹ
• Where:
• Y= Net Interest Income ratio (Net Interest Income divided by Total
Income)
• β0 - Constant/Y intercept
• X1 –Current ratio (current assets/ Current liabilities) to measure
funding risk.
• X2 – Liquidity ratio (Net liquid assets divided by net deposits) to
measure CBK liquidity risk
• X3–Log of Deposits as a control variable to capture the differences
in banks sizes.
• X4 – Interest rate, as a control variable.
• ε - Error term
13. Continued
• The results stated that there was a significantly positive
relationship between current ratio
• net interest income ratio at 5% level of significance.
• A relation between liquidity ratio and net interest
income ratio was also observed at 5% level of
significance
14. Basel III
• Basel III (or the Third Basel Accord) is a global,
voluntary regulatory framework on bank capital
adequacy, stress testing, and market liquidity risk.
• Was scheduled to be introduced from 2013 until 2015;
however, changes from 1 April 2013 extended
implementation until 31 March 2018.
• The third installment of the Basel Accords was
developed in response to the deficiencies in financial
regulation revealed by the financial crisis of 2007–08.
• Basel III is intended to strengthen the financial system
by increasing bank liquidity and decreasing bank
leverage.
15. Liquidity Coverage Ratio
(LCR)
• The liquidity coverage ratio (LCR) subjugates on the point of unifying
the resilience of the financial institutions for the stress period of 30
days irrespective of the support of the Central Bank or The
Government.
• The LCR is a minimum requirement and pertains to large body of
internationally consolidated banks and financial institutions.
• The LCR builds on traditional liquidity “coverage” methodologies used
internally by banks to assess exposure to stress events.
• The LCR requires that a bank’s stock of unencumbered high-quality
liquid assets (HQLA) be larger than the projected net cash outflows
(NCOF) over a 30-day horizon under a stress scenario.
16. Continued…
LCR = Stock of unencumbered high-quality liquid assets
Total net cash outflows over the next 30 calendar days
• High-quality liquid assets can be divided onto two
levels.
• Level 1 includes cash and other assets that may be
easily converted to cash in a stressed situation.
• Level 2 includes assets that will likely fetch nearly
full value in a stressed situation, such as low-risk
corporate bonds, covered bonds and some securities
issued by some sovereign institutions.
17. Continued…
• Total expected cash outflows are calculated by multiplying the size of
various types of liabilities and off-balance sheet commitments by the
rates at which they are expected to run off or be drawn down in the
stress scenario.
• The denominator of the LCR is on a “net” basis, as inflows can be
deducted from outflows, subject to a cap (minimum stock of HQLAs
equal to 25% of cash outflow).
• The standard requires that under normal circumstances, the value of
the ratio be no lower than 100%.
• However, the ratio’s volatility is linked to the volatility of the
estimated net cash outflows, encouraging banks to maintain a margin
above the required 100% level.
18. Continued…
• If most banks satisfy the LCR requirement by a comfortable margin, the
regulation’s effect on their behavior will be fairly minor.
• Insofar as meeting the LCR requirement is costly for banks, it is conceivable that
some banks may not exceed the regulatory threshold by a considerable margin.
• The LCR may increase the steepness of the very short end of the yield curve by
introducing an additional premium for interbank loans that extend beyond 30 days.
• However, the Liquidity Coverage Ratio's highly disparate treatment of retail and
wholesale funding may instead undermine financial stability by increasing the
competition for the types of funding treated preferably under the rule.
• Also, the financial regulators must take care that competition for traditionally more
stable debt such as retail deposits does not erode the very stability that supports
maturity transformation and the modem financial system
19. Net Stable Funding (NSF)
• Basel III – New Set of Capital Requirement.
• Seeks to calculate the proportion of long-term assets
which are funded by long-term stable funding.
• Stable funding includes: customer deposits, long-
term wholesale, and equity.
• Stable funding excludes short-term wholesale funding.
20. Contd.
• NSFR = Available Amount of Stable Funding / Required
Amount of Stable Funding
• NSFR >= 100%
22. Contd.
• Liquidity Risk and Financial Performance of Commercial
Banks in Kenya, by Jane Gathigia Muriithi & Kennedy
Munyua Waweru, they proposed a model where NSFR is
seen as an endogenous variable.
• Using the Cobb Douglas functional shown
• 𝑅𝑂𝐸 = 𝑓(𝐿𝐶𝑅,𝑁𝑆𝐹𝑅)
• Upon linearization and parameterization, the long run
model was specified as:
• 𝑅𝑂𝐸𝑖, 𝑡 = 𝜆0 +𝜆1𝐿𝐶𝑅𝑖, +𝜆2𝑁𝑆𝐹𝑅𝑖, +𝜃𝑖 +𝜀𝑖, 𝑡
• And the short run model as:
• 𝑅𝑂𝐸𝑖, = 𝜆0 +𝛽𝑅𝑂𝐸𝑖𝑡−1 +𝜆1𝐿𝐶𝑅𝑖, +𝜆2𝑁𝑆𝐹𝑅𝑖, 𝑡 +𝜃𝑖 +𝜀𝑖, 𝑡
23. Contd.
• After OLS - it was found that the results are in line with
the results of studies by Adolphus (2008) and Ahmed et
al. (2012), negative relationship between bank liquidity
and profitability.
• Banks hold liquid assets as an obligation - imposed by
the authorities.
• May lead to low bank profitability as low returns are
expected.
• When a bank has inadequate liquidity, it cannot obtain
sufficient funds, either by increasing liabilities or by
converting assets promptly, at a reasonable cost, thereby
affecting profitability.
24. Comparison
1997-2002 2003-2004 2005-2009 2010-2016
Bangia, Diebold,
Schuermann and
Stroughair (1999) -
Berkowitz (2000) -
Cosandey (2001)
Haitao Li, Junbo Wang,
Chunchi Wu and Yan He
(2003) - Ľuboš Pástor and
Robert F. Stambaugh (2003)
Jan Ericson, Olivier Renaule
(2006) - Cornelia Ernst,
Sebastian Stange, Christoph
Kaserer (2009)
Angela Romana, Alina
Camelia Sargu (2015) - Ioan
Trencaa , Nicolae Petria
and Amelia Anuta (2015) -
Morten Bech and Todd
Keister (2012) - Jeanne
Gobat, Mamoru Yanase,
and Joseph Maloney (2014)
Ask-bid variations
Liquidity Balance
Approach Current Ratio Liquidity Coverage Ratio
Transaction model Liquidity Ratio
Net Stable Funding
Ratio
Volume-based
Impact
Government Securities
Ratio
Non-performing assets
ratio
25. Conclusion
• The banks must use LCR and NSFR along with other
regulations
• The use of other ratios is also recommended
• An extensive depiction of liquidity scenario
• Better implementation of tools