Liquidity Risk features

FLE, CBC and Scenarios are entering the language of mainstream risk management since the onset of the credit crisis.

In essence, a fully featured Liquidity Risk analysis permits the creation of Liquidity Gaps (sometimes called MCO, but a modern term is now Forward Liquidity Exposure, or FLE) for the assets and liabilities on a bank’s balance sheet.

FLE then has an overlay of Counterbalancing Capability (CBC) to determine which highly liquid, unencumbered assets can be used in a liquidity crunch to generate liquidity through repo, pledging or outright sale.

Underpinning the entire system, is the ability to re-run the above under different scenarios to simulate market events such as reduced access to Interbank lending, Name Crisis, Collateral Repudiation etc

Contact us to learn more about Liquidity Risk.