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FRM Part II · FRM Exam Part II · Monitoring Liquidity

A bank's cumulative net payment position (receipts minus payments, in USD million) at four checkpoints on a day is: 10:00 = -40; 12:00 = -110; 14:00 = -65; 16:00 = +20. Its available intraday liquidity at the start of the day was USD 150 million. What is the daily maximum intraday liquidity usage, and the remaining buffer at that peak?

Maximum intraday liquidity usage is USD 110 million, the largest net cumulative debit at 12:00. Subtracting it from USD 150 million of available intraday liquidity leaves a USD 40 million buffer at the peak.

  1. AUSD 110 million usage; USD 40 million bufferCorrect
  2. BUSD 110 million usage; USD 150 million buffer
  3. CUSD 20 million usage; USD 130 million buffer
  4. DUSD 65 million usage; USD 85 million buffer

Explanation

The largest net cumulative debit is -110 at 12:00, so maximum usage is USD 110m. Buffer at the peak is 150 - 110 = USD 40m. Using the 16:00 position or the 14:00 position ignores the peak; ignoring the usage gives 150 incorrectly.

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