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Jacobs Liquidty Risk Garp 2 16 12

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Michael Jacobs, Jr.
Michael Jacobs, Jr.

This presentation will survey and discuss various quantitative considerations in liquidity risk for a financial institution. This includes the concept of liquidity-at-risk (LaR) as a determinant of buffers, as well as how one defines and quantifies such buffers. We will also examine issues such as limit-related input for liquidity policy and transfer pricing as an alternative concept. Two stylized models of liquidity risk are presented and analyzed.

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Quantitative Measurement and Management of Liquidity Risk in a Banking Context Michael Jacobs, PhD, CFA Senior Financial Economist Credit Risk Analysis Division / U.S. Office of the Comptroller of the Currency G.A.R.P. 13 th Annual Risk Management Convention February 2012 The views expressed herein are those of the authors and do not necessarily represent the views of the Office of the Comptroller of the Currency or the Department of the Treasury.
Outline ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Introduction to Liquidity Risk Management and Measurement ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Introduction to Liquidity: Review of the Literature ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Introduction to Liquidity: Empirics and Stylized Facts * ,[object Object],[object Object],[object Object]
Introduction to Liquidity: Empirical Evidence (continued) * ,[object Object],[object Object],[object Object],* Source: Inanoglu, H., Jacobs, Jr., M. and R. Sickles, 2009, Analyzing bank efficiency: Are too-big-to-fail banks efficient?, Working paper, U.S. Office of the Comptroller of the Currency and Board of Governors of the Federal Reserve System.
Introduction to Liquidity Risk Management and Measurement ,[object Object]
Liquidity Risk in Relation to the Risk Management Universe ,[object Object]
Conceptual Considerations: Stylized Facts Liquidity Risk ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Conceptual Considerations: How to Look at Liquidity ,[object Object],[object Object],[object Object],[object Object]
Conceptual Considerations: Liquidity Risk & Other Risks ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
Segway to Quantification: The Liquidity Balance Sheet
A Quantitative Framework for Managing Liquidity Risk ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
A Quantitative Framework for Managing Liquidity Risk (cont.) ,[object Object],[object Object],[object Object],[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],A Quantitative Framework for Managing Liquidity Risk (cont.)
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],A Quantitative Framework for Managing Liquidity Risk (cont.)
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Quantitative Frameworks: A Simple Model Liquidity Risk 103 101 105 99 103 107 97 101 105 109 Period 3 Period 2 Period 1 Period 0 1a 1b 2a 2b 2c 3a 3b 3c 3d Short/Long Long/Short
[object Object],[object Object],[object Object],[object Object],[object Object],A Simple Model of Liquidity Risk (continued) 103 101 105 99 103 107 97 101 105 109 Period 3 Period 2 Period 1 Period 0 1a 1b 2a 2b 2c 3a 3b 3c 3d Short/Long Long/Short
[object Object],[object Object],[object Object],A Simple Model of Liquidity Risk (continued) ,[object Object]
[object Object],[object Object],[object Object],[object Object],A Simple Model of Liquidity Risk (continued) ,[object Object]
[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],A Simple Model of Liquidity Risk (concluded)
An Option Theoretic Model for Liquidity Risk ,[object Object],[object Object],[object Object],[object Object],[object Object]
An Option Theoretic Model for Liquidity Risk (continued) ,[object Object],[object Object],[object Object],[object Object],[object Object]
An Option Theoretic Model for Liquidity Risk (continued) ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]
An Option Theoretic Model for Liquidity Risk (concluded) ,[object Object],[object Object],[object Object]

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Jacobs Liquidty Risk Garp 2 16 12

  • 1. Quantitative Measurement and Management of Liquidity Risk in a Banking Context Michael Jacobs, PhD, CFA Senior Financial Economist Credit Risk Analysis Division / U.S. Office of the Comptroller of the Currency G.A.R.P. 13 th Annual Risk Management Convention February 2012 The views expressed herein are those of the authors and do not necessarily represent the views of the Office of the Comptroller of the Currency or the Department of the Treasury.
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  • 12. Segway to Quantification: The Liquidity Balance Sheet
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  • 15.
  • 16.
  • 17.
  • 18.
  • 19.
  • 20.
  • 21.
  • 22.
  • 23.
  • 24.
  • 25.