FRM Part II · FRM Exam Part II · Liquidity Risk
A bank runs a 30-day stress test. Opening liquid assets (after haircuts) are USD 900 million. Stress outflows: retail deposits of USD 2,000 million run off at 10%; wholesale funding of USD 800 million runs off at 50%. Inflows: USD 150 million of contractual loan repayments, assumed fully received. What is the survival-horizon surplus (shortfall) at day 30?
Retail runoff of 200 million plus wholesale runoff of 400 million gives 600 million outflows; less 150 million inflows gives 450 million net outflow. Against 900 million of liquid assets, the bank has a surplus of 450 million.
- AUSD 450 million surplus
- BUSD 150 million surplus
- CUSD 50 million surplusCorrect
- DUSD 150 million shortfall
Explanation
Outflows = 2,000×10% = 200 plus 800×50% = 400, total 600. Net outflow = 600 − 150 = 450. Surplus = 900 − 450 = 450. Check: option 0 is 450, so recompute: the surplus is 450 million.
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