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CASE STUDY ON LIQUIDITY RISK MANAGEMENT BY ASHISH SIR
What is liquidity risk in the context of bank financial management?
Liquidity risk is the risk that a bank is unable to meet its financial obligations as they fall due without incurring unacceptable losses. It arises from mismatches between asset and liability maturity profiles.
What is the primary objective of liquidity risk management in a bank?
Ensure bank can meet obligations without significant losses.
What are the two dimensions of liquidity risk?
The two dimensions are funding liquidity risk (inability to raise funds to meet obligations) and market liquidity risk (inability to liquidate assets at fair value without significant price impact).
What is the difference between funding liquidity risk and market liquidity risk?
Funding risk is inability to raise funds; market risk is inability to sell assets.
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