Measuring liquidity risk

The failures in liquidity risk management over the past year have pushed financial institutions and software vendors to reassess their models. What is on offer in terms of liquidity risk systems, how useful are they, and what steps are being taken to improve or develop liquidity risk technology? By Clive Davidson


Regulators have identified many shortcomings while investigating the causes of the credit crisis. Key among the findings is the realisation that many assumptions about liquidity were built on shaky foundations. Financial institutions presumed they would always be able to raise funding and woefully underestimated the amount of capital they might need to satisfy contingent obligations. Firms rarely considered the implications of investing in complex products and, as a result, were left holding on

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