Thursday, 28 Mar, 2024

+91-9899775880

011-47044510

011-49075396

Measurement of Total Liquidity Assets Risk Resulting from Increase of Liquidity Spread

International Journal of Financial Management

Volume 8 Issue 2

Published: 2018
Author(s) Name: Eugenia Schmitt | Author(s) Affiliation: FinRiskConsult, Fresenius, University of Applied Sciences, University of Applied Management, Germany
Locked Subscribed Available for All

Abstract

The importance of analysing the effects of changes in liquidity spreads for long maturities on both costs and wealth increases with the increasing importance of capital market-based refinancing by banks. The present study proposes a present value based approach for middle-sized banks. It enables to measure the impact of the extreme change in the institution’s own liquidity and spreads on the current liquidity situation by investigating the entire maturity horizon to a dangerous extent. Different scenarios for refinancing alternatives due to the different developments of the liquidity spreads can be analysed straightforwardly. This enables a rapid assessment of the risk situation over the modelled time. In the dynamized version, which covers the planning horizon, the interest rate effects arising over time are also made visible. The result of the model approach is suitable for strategic decisions in planning the refinancing structure under alternative conditions.

Keywords: Banks, Basel III, Liquidity Risk, Liquidity Spread, Present Value, Stress-Testing

View PDF

Refund policy | Privacy policy | Copyright Information | Contact Us | Feedback © Publishingindia.com, All rights reserved