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

A bank's payments are mostly sent early in the day while incoming payments from its counterparties arrive late in the afternoon. Which is the most direct consequence for intraday liquidity management?

Sending payments early while receiving late raises peak intraday liquidity usage, because the bank must fund outflows from its own resources before offsetting inflows arrive. Timing, not just end-of-day net flow, drives intraday needs.

  1. AHigher peak intraday liquidity usage, because the bank must fund outflows before inflows arriveCorrect
  2. BLower peak usage, because late receipts reduce settlement risk
  3. CNo effect, because daily net flows are what determine liquidity needs
  4. DA lower daily net position because of timing

Explanation

Intraday needs depend on the timing of flows, not only daily net totals. Early outflows and late inflows widen the cumulative negative gap, raising the peak need. Daily net flows may be unchanged, so that option is wrong.

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