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FRM Part II · FRM Exam Part II · Intraday Liquidity Risk Management

A bank's daily intraday liquidity monitoring shows the following for one day (in USD millions): opening available intraday liquidity of 400; payments sent of 1,500 and payments received of 1,260, which occur in the sequence that produces the largest net cumulative outflow at the end of the day. Assume for the metric of daily maximum intraday liquidity usage, the lowest point of the net cumulative position was at the end of the day. What is the daily maximum intraday liquidity usage, and is the 400 sufficient?

Daily maximum intraday liquidity usage is the largest net cumulative outflow, here 1,500 sent less 1,260 received, or USD 240 million. Since the 400 million available exceeds this, it is sufficient with 160 million of headroom. Gross flows should not be used because incoming payments offset outgoing ones.

  1. AUSD 240 million; sufficient because 400 exceeds 240Correct
  2. BUSD 1,500 million; insufficient because 400 is less than 1,500
  3. CUSD 1,260 million; insufficient because 400 is less than 1,260
  4. DUSD 640 million; insufficient because 400 is less than 640

Explanation

Net cumulative position = received 1,260 − sent 1,500 = −240. The largest negative net cumulative position is 240, which is the daily maximum usage. Available liquidity of 400 exceeds it, leaving 160 of headroom. Using gross payments sent (1,500) or received (1,260), or adding the two figures (640 is 400+240), ignores netting of flows.

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