Liquidity Risk Complete Exam Questions And Detailed Answers.
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Course
LCR
Institution
LCR
Liquidity Risk - correct answer The risk that a financial firm will not be able to meet its current cash flow needs.
depositors withdraw funds
short term loans are not renewed - correct answer What are...
Liquidity Risk - correct answer The risk that a financial firm will not be able to
meet its current cash flow needs.
depositors withdraw funds
short term loans are not renewed - correct answer What are some liability-
side examples of liquidity risk?
borrower draws down on line of credit - correct answer What are some asset-
side examples of liquidity risk?
1) primary (banks must hold 10% of transaction deposit in)
2) secondary reserves (t-bills, govt agency debt, commercial paper, fed funds, extra cash) - correct
answer What are sources of liquidity?
borrow fed funds, borrow from fed, increase deposits, sell liquid assets, sell commercial paper - correct
answer What are some solutions to liquidity risk?
Liquidity Coverage Ratio (LCR)
*fully implemented in 2017 - correct answer = high quality liquid assets/total
cash flow over next 30 calendar days ≻ 1
(must figure out what cash flows in next 30 days might be in a distressed situation...answers "do you
have enough liquid assets to cover liabilities in next 30 days)
Net Stable Funding Ratio (NSFR) - correct answer = Available amount of stable
funding/required amount of stable funding ≻ 100%
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