1 - 7 of 7 Chapters
[Banks are intermediaries between liquidity supplying depositors and liquidity demanding borrowers.1 Furthermore, they provide contingent liquidity in the form of loan commitments and liquidity backup lines. Importantly, liquidity is a core resource for banks that needs to be actively managed....
[Liquidity is a term with distinct but related meanings depending on the context. Traders, treasurers and central bankers use the term ’liquidity’, but mean different things.1 Because of this, it is necessary to de- and refine what we understand by liquidity. The literature distinguishes three...
[This chapter derives variables that have to be considered by a bank liquidity model. In a preparatory step, we introduce fundamental concepts and tools that are used in subsequent sections. Variables are derived from liquidity strategies run by banks. The variables are stochastic processes....
[The step from the generic framework to a concrete liquidity model is taken by assuming specific processes for the liquidity variables. In chapter 3 we saw that a complete liquidity model needs the following sub-models:Cash Flow ModelFunding ModelLiquidation ModelShort-rate Model]
[This section consists of two parts: first, we split the product cash flow and transfer the components to different departments (Cash Flow Transfer Model). In this manner, the transfer permits us to separate the management of cash flow and spread risk. A separate management is desirable as both...
[This chapter discusses the optimization of long-term and short-term liquidity. The first section restricts the setup in order to allow for explicit solutions. The second section analyses the optimization within Origination. The third presents the optimization within Money Market while the final...
[The motivation for this work was threefold: firstly, regulators encourage banks to develop internal models for liquidity management. Secondly, quantitative and complete liquidity models for banks are unavailable. Thirdly, corporate liquidity models disregard bank particularities.]
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