FRM Part II · FRM Exam Part II · Contingency Funding Planning
A bank projects 30-day stressed cash outflows of USD 900 million. Its unencumbered assets are: USD 300 million cash at the central bank, USD 400 million government bonds (haircut 5%), and USD 500 million corporate bonds (haircut 20%). Expected stressed inflows are USD 100 million. What is the survival-horizon surplus (shortfall) of counterbalancing capacity over net outflows?
Counterbalancing capacity after haircuts is 1,080 million, and net stressed outflow is 800 million, giving a surplus of 280 million.
- AUSD 80 million surplusCorrect
- BUSD 180 million surplus
- CUSD 20 million surplus
- DUSD 120 million shortfall
Explanation
Capacity = 300 + 400×0.95 + 500×0.80 = 300 + 380 + 400 = 1,080. Net outflow = 900 − 100 = 800. Surplus = 1,080 − 800 = 280... recompute: 1,080 − 800 = 280, so none of the listed values match; the correct figure is USD 280 million.
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