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FRM Part II · FRM Exam Part II · Monitoring Liquidity

A bank reports the following contractual cash flows (USD million) for the 0-30 day bucket: asset inflows of 480 and liability outflows of 620. Over the next bucket (31-90 days), inflows are 350 and outflows are 300. The bank has no other flows. What are the periodic gap for the 31-90 day bucket and the cumulative gap at the end of 90 days?

The 31-90 day periodic gap is +50 million (350 inflows minus 300 outflows), and the cumulative gap is -90 million, because the first bucket's -140 million shortfall is only partly offset by the +50 million surplus in the second bucket.

  1. APeriodic gap +50; cumulative gap -90Correct
  2. BPeriodic gap +50; cumulative gap +190
  3. CPeriodic gap -50; cumulative gap -190
  4. DPeriodic gap +50; cumulative gap -140

Explanation

Gap in the first bucket = 480 - 620 = -140. Second bucket = 350 - 300 = +50. Cumulative = -140 + 50 = -90. Option D forgets to add the second gap to the first in the cumulative figure, giving -140; option B uses the wrong sign on the first gap.

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