Liquidity Risk Analysis

riskpro™ covers liquidity analysis according to user-defined scenarios for Market and Funding Liquidity Risk as well as contingency funding plans. The module of liquidity risk analysis system is fully integrated with ALM, credit and market risk of the riskpro™ analysis methods.

Liquidity gap

Using riskpro™ the bank can calculate and report marginal, cumulative and residual gaps. The calculation can be used with any type or grouping of time intervals starting from one day.

Advanced liquidity gap

riskpro™ provides contingent gap distinguishing between different levels of certainty (fixed cash flows, replicated cash flows, option cash flows, etc.) of future cash flows.

Cash management / margining

Cash management allows making internal deals between profit centers automatically. Using the riskpro™ analysis solution, margining can be used for derivative products in order to limit the exposure of the clearing house or counterparty.

Balance sheet analysis, liquidity ratios and limits

Using the highly flexible reporting functions of riskpro™ different balance sheet items on both asset and liability sides can be set into a relation, depending on whether assets are liquid or illiquid, and on whether their funding is stable or volatile. The limit management module comprises the definition of limits like some liquidity ratio. Each limit has a time dimension, and every change is historized. A flexible reporting enables dashboards and alerts.

Stress testing

One of the main drivers for liquidity risk management is to employ stress tests consisting of performing scenario analysis in regards to market conditions, business strategies and client behavior. Liquidity contingency can be tested using Market, Credit and Funding Liquidity Risks under static and dynamic analysis combined with going concern scenarios. All types of scenarios can be designed and implemented for testing the bank’s Contingency Liquidity Risk stress scenarios. riskpro™ is a strong tool for fulfilling the liquidity stress testing requirements supporting the banking liquidity confidence as well as complying with regulatory directives.

Monte Carlo dynamic

Monte Carlo analysis is a strong tool of riskpro™ system that can be used for generating new paths of market price scenario defining the haircuts of the exposures, considering the simulated discounts all applied in the Market Liquidity Risk and Funding Plan analysis.

Instrument coverage

All above methods are applied consistently for any type of financial product/instruments from deposits to exotic options. For more information see Fact Sheets about riskpro™ Financial Instruments/Products Coverage.

Special riskpro™ strengths

• Most advanced gap types and unique methods

• Full integration of liquidity measurement and dynamic simulation taking customer behavior and liquidation scenarios into account

• Integration of credit risk (default behavior and drawing of open limits) into liquidity planning

• Efficient implementation of Market Liquidity Risk, Contingency Liquidity Risk under stress conditions, Contractual Liquidity Risk under normal conditions and Contingency Funding Plans.