FRM Part II · FRM Exam Part II · Contingency Funding Planning
A bank projects a 30-day stress cash outflow of USD 900 million and inflows of USD 250 million. Its buffer consists of: USD 200 million cash at the central bank (no haircut), USD 500 million government bonds (5% haircut), and USD 300 million corporate bonds (25% haircut). The CFP requires post-stress buffer coverage of at least 100% of net outflow. What is the surplus or shortfall?
Net outflow is USD 650 million. Haircut buffer is 200 + 475 + 225 = USD 900 million, giving a surplus of USD 250 million.
- AShortfall of USD 10 millionCorrect
- BSurplus of USD 10 million
- CSurplus of USD 50 million
- DShortfall of USD 50 million
Explanation
Net outflow = 900 - 250 = 650. Buffer after haircuts = 200 + 475 + 225 = 900?? Check: 500 x 0.95 = 475; 300 x 0.75 = 225; total 900. Surplus = 900 - 650 = 250. None of the listed options match, so the stated key is incorrect.
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