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

At the start of a day, Bank Alpha holds 400 million in its central bank account and has an unused collateralised intraday credit line of 250 million. During the day it expects to receive 900 million in incoming payments and to send 1,100 million in outgoing payments. Ignoring timing, what is its net cumulative position and the total available intraday liquidity at end of day, before using any credit line, assuming only the account balance and net flows count?

Net flow is incoming 900 minus outgoing 1,100, which equals minus 200 million. Subtracting this from the opening 400 million balance leaves 200 million at end of day. The unused credit line is a backup source and not part of the balance.

  1. ANet flow of -200 million; end-of-day balance of 200 millionCorrect
  2. BNet flow of -200 million; end-of-day balance of 450 million
  3. CNet flow of +200 million; end-of-day balance of 600 million
  4. DNet flow of -1,100 million; end-of-day balance of -700 million

Explanation

Net flow = 900 - 1,100 = -200 million. Balance = 400 - 200 = 200 million. The credit line is not part of the balance and is unused. The 450 option wrongly adds the credit line to the balance; the -700 option ignores incoming payments.

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