Cost of liquidity

Calculating the market value for non-maturity deposits can often be a headache for bankers. Vice-president and director at strategic consulting services firm Fiserv IPS-Sendero, Suresh Sankaran offers an antidote with his methodology for the computation of a term structure for liquidity premium

Traditionally, liquidity has been defined as:

- A Russian problem

- An Asian problem

- Someone else's problem

- A broker's problem

- Not something to worry about since it is guaranteed by the Central Bank

- All of the above.

Even the Bard has commented on liquidity with the rather pithy 'put money in thy purse'.

The fact is most of us agree that liquidity is an important risk element but it is also indisputable that we probably spend less time thinking about it than any other risk category. From an

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