Liquidity Risk

Liquidity risk is fundamental to the management of every financial operation. This groundbreaking course will teach you the best proactive methods for measuring and managing liquidity risk in today's turbulent market environment.

Course Highlights

Attend this comprehensive 2-day course and get to grips with:

The effects of liquidity risk on securities pricing and funding
The challenges of building a successful framework for liquidity risk management
The regulatory requirements for liquidity
Effective liquidity stress testing and contingency planning
The techniques for modelling liquidity risk within a treasury framework
The impact of liquidity in the debacle of LTCM

For details of the course trainer, please download the course brochure

Booking Information

Dates	Prices	Book This Course	Discount
09 - 10 Sep 2010	£ 1899		-
17 - 18 Feb 2011	£ 1899		-

Course Programme

Understanding the Nature of Liquidity Risk

The universe of investable instruments
Pools of liquidity and benchmark securities, off the run and illiquids
Normal market sizes, bid-offer, block trades
Repo and the funding of illiquid instruments
Liquidation and "fire-sales"
Liquidity risk in banking, securities trading and insurance

Securities Pricing in the Presence of Iiquidity

Random walks and the assumption of continuous trading
Gap risk
The effect of jumps on the pricing framework
Risk premiums and risk neutrality
Impact on derivatives pricing and mark to market

PC Workshops: Computer based exercises modelling impact of liquidity risk on securities / derivatives prices

Building a Framework for Liquidity Management

Mismatch approach
Foreign currency liquidity management
Internal controls for liquidity risk management: stress testing
Internal controls for liquidity risk management: scenario analysis
Double default and the analysis of collateralised transactions
Basel and liquidity risk

Contingent Liquidity Risk

The need for contingency planning
Written contingency plans
Crisis management plans for assets
Crisis management plans for liabilities
Internal and external communications
Other crisis management issues

Liquidity Stress Testing

Why stress test liquidity
General considerations
Empiricism versus rocket science
Current stress test priorities
Assumption sensitivity
Additional considerations

Liquidity Risk in the Treasury Framework

Metrics and measures of liquidity risk
Liquidity gap analysis and the bank's liquidity profile
Expected and unexpected loss analysis in the presence of illiquidity
Liquidity management policy
Regulatory requirements for liquidity management
The use of conduits

Measuring Market Risk: Liquidity-adjusted Value-at-Risk

Definitions
Using liquidity-adjusted VAR to manage risk
Limitations of standard VAR measures to assess liquidity

Systemic Changes in Liquidity and Volatility

Risk capital and illiquidity
The effect of VAR models on liquidity cycles
Liquidity and volatility
Predicting volatility changes: GARCH models
The perspective from implied volatility
Implied probability distribution and tail risk

Case Study: Liquidity risk in the failure of Long Term Capital Management