Financialriskmanagement金融风险管理

1、2016“”Liquidity Risk金融学4班 2012121435 耿王陈“”DefinitionLiquidity risk has different meanings in different contexts. In investing terms, bondholders face varying liquidity risks based on the likelihood that they may have to sell a bond below its listed value. This type of liquidity risk can actually ext

2、end to any security, describing the risk that an asset finds no buyers due to lack of liquidity in its given market. In economics and business management, liquidity refers to the ability of a financial institution to meet its operational and debt obligations without incurring severe losses or defaul

3、ting. These two types of risk are sometimes called funding (cash-flow) liquidity risk and market (asset) liquidity risk.耿王陈 2012121435“”Liquidity Risk in InvestingWithin the commonly accepted categories of financial risks, liquidity risk is considered a type of market risk. It describes the phenomen

4、on of opposing market participants (buyers and sellers) that are unable to find one another in a timely manner. Since no trade can be made, buyers may have to raise their bids or sellers may have to lower their asks to exchange an asset. Different assets are often categorized into different levels o

5、f liquidity risk, and investors generally demand more returns for increased liquidity risk. All tradable assets assume some level of liquidity risk. This is even true in highly liquid markets, such as the foreign exchange, where liquidity fluctuates based on which markets are currently open.耿王陈 2012

6、121435“”Liquidity Risk in EconomicsA primary concern among accountants and treasurers, business liquidity risk asks how well-positioned a company is to pay its bills if revenues slow down. This type of risk is very closely related to credit risk, leverage and cash flow. Companies that have higher li

7、quidity risks are more likely to face default and receive poor credit ratings.耿王陈 2012121435“”Formation reasonLiquidity risk arises from the bank was unable to cope with liquidity problems due to an increase in assets or decrease liabilities caused. When a bank lacks liquidity when it can not rely o

8、n debt growth at a reasonable cost or net realizable assets to quickly obtain sufficient funds, which will affect their profitability. In extreme cases, insufficient liquidity can lead to bank failures.Exist in liquidity risk in various markets, such as securities, funds, currency and so on.耿王陈 2012

9、121435“”Significance of liquidity risk management (1) Liquidity management is to expand the banking business, and enhance the strength of the basic means of banks.(2) sufficient liquidity to maintain and enhance the credibility of the bank guarantee.(3) liquidity management is to avoid and reduce th

10、e risk of banks 耿王陈 2012121435田岷 金融学4班 2012121433Financial crisisWhat is Financial crisisA situation in which the supply of money is outpaced by the demand for money. This means that liquidity is quickly evaporated because available money is withdrawn from banks (called a run), forcing banks either

11、to sell other investments to make up for the shortfall or to collapse”.In broader terms “The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value. In the 19th and early 20th centuries, many financ

12、ial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles, currency crises, and sovereign defaults。田岷 2012121433TypesInternational f

13、inancial crisesBanking crisisCurrency crisisWider economic crisis田岷 2012121433Causes and consequencesUncertainty and herd behaviorRegulatory failuresStrategic complementarities in financial marketsLeverageAsset-liability mismatch田岷 2012121433TheoriesCoordination gamesMarxist theoriesMinskys theory田岷

14、 2012121433Financial Risk Management 国金四班 樊亚非（2012121430）Liquidity risk: A risk left to be tamed Are we well equipped to deal with liquidity risk in banks? In theory, yes, but the recent crisis has demonstrated how easy it is for liquidity to evaporate and to make all liquidity stress-tests and cont

15、ingency plans obsolete in a matter of days. Liquidity can be defined extremely simply as the capability to have cash when needed . But liquidity risk is far more treacherous than such a simple, and valid, definition suggests and it cannot be addressed easily in standard ways. 2012121430 樊亚非 What is

16、liquidity risk ? Definitions: In finance, liquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit). 2012121430 樊亚非 Causes of liquidity risk Liquidity risk arises from situations in which a party interested

17、 in trading an asset cannot do it because nobody in the market wants to trade for that asset. Liquidity risk becomes particularly important to parties who are about to hold or currently hold an asset, since it affects their ability to trade. Liquidity risk is financial risk due to uncertain liquidit

18、y. An institution might lose liquidity if its credit rating falls, it experiences sudden unexpected cash outflows, or some other event causes counterparties to avoid trading with or lending to the institution. A firm is also exposed to liquidity risk if markets on which it depends are subject to los

19、s of liquidity.国金四班 2012121430 樊亚非 Market and funding liquidity risks compound each other as it is difficult to sell when other investors face funding problems and it is difficult to get funding when the collateral is hard to sell. Liquidity risk also tends to compound other risks. If a trading orga

20、nization has a position in an illiquid asset, its limited ability to liquidate that position at short notice will compound its market risk. Suppose a firm has offsetting cash flows with two different counterparties on a given day. If the counterparty that owes it a payment defaults, the firm will ha

21、ve to raise cash from other sources to make its payment. Should it be unable to do so, it too will default. Here, liquidity risk is compounding credit risk.国金四班 2012121430 樊亚非Liquidity risk for banks A first source of liquidity risk is the existence of embedded options in the balance sheets of banks

22、. A second source of liquidity risk is the structural mismatch of banks financing long-term assets with short-term liabilities, such as bank deposits and short-term debt. Finally, liquidity risk can be viewed as a consequential risk, a risk that is triggered by other events. Among bank-specific trig

23、gers are adverse earnings or loss announcements, or a downgrade of a bank.国金四班 2012121430 樊亚非 Financial Crisis翟春塬2012121432金融学4班The analysis of crisis during 07-09Growth of the housing bubblePredatory lendingDeregulationIncreased debt burden or over-leveraging翟春塬 2012121432The analysis of crisis dur

24、ing 07-09Financial innovation and complexityIncorrect pricing of riskBoom and collapse of the shadow banking systemCommodity bubbleSystemic crisis翟春塬 2012121432Effects created by Financial crisisImpacts on financial institutionsCredit markets and the shadow banking systemWealth effectsGlobal contagi

25、on翟春塬 2012121432Effects created by Financial crisisEffects on the global economyU.S. economic effectsOfficial economic projections翟春塬 2012121432Responses to financial crisisEmergency and short-term responsesRegulatory proposals and long-term responses翟春塬 2012121432 In finance, liquidity risk is the

26、risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit).白钧汉 金融学4班 2012121434lMarket liquidity An asset cannot be sold due to lack of liquidity in the market essentially a sub-set of market risk. Widening bid/offer spread Makin

27、g explicit liquidity reserves Lengthening holding period for VaR calculationsl Funding liquidity Risk that liabilities: Cannot be met when they fall due Can only be met at an uneconomic price Can be name-specific or systemicCauses of liquidity risk Liquidity risk arises from situations in which a pa

28、rty interested in trading an asset cannot do it because nobody in the market wants to trade for that asset. Liquidity risk becomes particularly important to parties who are about to hold or currently hold an asset, since it affects their ability to trade. Liquidity risk is financial riskdue to uncer

29、tain liquidity. An institution might lose liquidity if its credit rating falls, it experiences sudden unexpected cash outflows, or some other event causes counterparties to avoid trading with or lending to the institution. A firm is also exposed to liquidity risk if markets on which it depends are s

30、ubject to loss of liquidity. Market and funding liquidity risks compound each other as it is difficult to sell when other investors face funding problems and it is difficult to get funding when the collateral is hard to sell.1 Liquidity risk also tends to compound other risks. If a trading organizat

31、ion has a position in an illiquid asset, its limited ability to liquidate that position at short notice will compound its market risk. Accordingly, liquidity risk has to be managed in addition to market, credit and other risks. Because of its tendency to compound other risks, it is difficult or impo

32、ssible to isolate liquidity risk. In all but the most simple of circumstances, comprehensive metrics of liquidity risk do not exist.白钧汉 2012121434Liquidity gap: Culp defines the liquidity gap as the net liquid assets of a firm. The excess value of the firms liquid assets over its volatile liabilitie

33、s. A company with a negative liquidity gap should focus on their cash balances and possible unexpected changes in their values. As a static measure of liquidity risk it gives no indication of how the gap would change with an increase in the firms marginal funding cost.Liquidity risk elasticity: Culp

34、 denotes the change of net of assets over funded liabilities that occurs when the liquidity premium on the banks marginal funding cost rises by a small amount as the liquidity risk elasticity. For banks this would be measured as a spread over libor, for nonfinancials the LRE would be measured as a s

35、pread over commercial paper rates. Problems with the use of liquidity risk elasticity are that it assumes parallel changes in funding spread across all maturities and that it is only accurate for small changes in funding spreads.Measures of asset liquidity:Bid-offer spread Market depthImmediacyResil

36、ience白钧汉 2012121434Liquidity-adjusted value at risk: Liquidity-adjusted VAR incorporates exogenous liquidity risk into Value at Risk. It can be defined at VAR + ELC (Exogenous Liquidity Cost). The ELC is the worst expected half-spread at a particular confidence level.Liquidity at risk: The Liquidity

37、 at risk measure is suggested. A countrys liquidity position under a range of possible outcomes for relevant financial variables (exchange rates, commodity prices, credit spreads, etc.) is considered. It might be possible to express a standard in terms of the probabilities of different outcomes.Scen

38、ario analysis-based contingency plans: The FDIC discuss liquidity risk management and write Contingency funding plans should incorporate events that could rapidly affect an institutions liquidity, including a sudden inability to securitize assets, tightening of collateral requirements or other restr

39、ictive terms associated with secured borrowings, or the loss of a large depositor or counterparty.“Diversification of liquidity providers: If several liquidity providers are on call then if any of those providers increases its costs of supplying liquidity, the impact of this is reduced. The credit issuer should have an appropriately high credit rating to increase the chances that the resources will be there when needed. uWithdrawal option: A put of the illiquid underlying at the market price.uBermudan-style return put option: