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

A bank has the following hourly cumulative net payment flows (receipts minus payments, USD million) on a day: 10:00 = -80; 12:00 = -150; 14:00 = +40; 16:00 = -220; 18:00 = -60. It started the day with no intraday credit drawn. Which statement is correct about its maximum daily intraday liquidity usage and its end-of-day position?

The maximum daily intraday liquidity usage is the largest cumulative net negative position, USD 220 million at 16:00. The end-of-day cumulative position is -60 million. Summing the negative snapshots is wrong because the figures are already cumulative, not incremental.

  1. AMaximum usage is USD 220 million at 16:00; end-of-day net position is -60 millionCorrect
  2. BMaximum usage is USD 150 million at 12:00; end-of-day net position is -60 million
  3. CMaximum usage is USD 220 million at 16:00; end-of-day net position is +40 million
  4. DMaximum usage is USD 510 million, the sum of the negative values; end-of-day net position is -60 million

Explanation

Maximum usage is the largest cumulative net negative position, which is -220 at 16:00. The end-of-day cumulative value is -60. Summing the negative snapshots double counts cumulative figures, and 12:00 is not the peak.

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