Investment funds would magnify a liquidity crisis – BoE

Bank of England’s first stress simulation suggests corporate spreads would gap 41bp on 1% redemptions

Liquidity drip
Drying up: redemptions induce more fund investors to pull their money out

Academics have welcomed the Bank of England’s (BoE) first stress simulation of a redemption run in European investment funds, applauding its introduction of endogenous risk themes to the policy debate. Some critics, however, feel the model could go further.

The BoE introduced the simulation to work out whether the funds absorb or exacerbate financial shocks.

“The Bank of England is doing state-of-the-art research, ahead of its peers in how they think about this problem,” says Jon Danielsson,

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact [email protected] or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact [email protected] to find out more.

To continue reading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here: