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FRM Part II · FRM Exam Part II · Intraday Liquidity Risk Management

A bank has a CLS pay-in schedule requiring it to pay in 400 million USD by the early-morning deadline, while it expects to receive 150 million USD of pay-outs only later in the settlement cycle. The bank's USD intraday balance before the pay-in is 100 million USD, and it can draw on an intraday credit line. What minimum intraday credit must it draw to meet the pay-in, assuming no other flows?

The bank needs 300 million USD of intraday credit. The 400 million USD pay-in is due before the 150 million USD pay-out arrives, so only the existing 100 million USD balance offsets it. The shortfall is 400 minus 100, which equals 300 million.

  1. A150 million USD
  2. B250 million USD
  3. C300 million USDCorrect
  4. D400 million USD

Explanation

The pay-in must be funded before the pay-out arrives, so the pay-out cannot be used. Required 400 minus available balance 100 gives 300 million USD. Subtracting the 150 pay-out too (giving 150) wrongly assumes it arrives first.

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