FRM Part II · FRM Exam Part II · Monitoring Liquidity
A bank treasurer wants a liquidity monitoring tool that shows, for each future time band, the difference between contractual cash inflows and outflows so that funding shortfalls can be spotted early. Which tool best serves this purpose?
A contractual maturity mismatch ladder is the right tool. It slots contractual inflows and outflows into time bands and shows the net and cumulative gaps, so the treasurer can see where funding shortfalls will occur. The other options address market, credit or capital measurement instead.
- AA contractual maturity mismatch (cash flow gap) ladderCorrect
- BA Value-at-Risk backtesting exception report
- CA credit rating transition matrix
- DA risk-weighted asset density ratio
Explanation
A maturity mismatch ladder places contractual inflows and outflows in time buckets and shows net gaps and cumulative gaps, revealing where funding shortfalls arise. The other tools relate to market risk model validation, credit migration, and capital measurement, not liquidity timing.
Did you get it right without looking?
One question tells you little. A timed set on Monitoring Liquidity shows your real accuracy, how long you take and where you lose marks.
More Monitoring Liquidity questions
- A bank holds 200 of high-quality liquid assets (HQLA). Under a combined stress scenario, 30% of 500 of wholesale funding runs off, and 5% of…
- Which indicator would best help a bank monitor whether it can meet payment obligations that must be settled at a specific time of day, such …
- A bank has the following contractual cash flows (in USD millions) over three time bands: Band 1 (0-7 days): inflows 120, outflows 150; Band …
- A bank's liquidity gap report shows a large negative cumulative gap in the 1-week bucket but a large positive gap in the 3-month bucket. Wha…
- A treasurer converts a contractual gap into a behavioral gap. Retail demand deposits of USD 800 million are contractually repayable on deman…
- A bank's treasury prepares a contractual liquidity gap report. Which of the following best describes the main limitation of relying solely o…