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

Bank Beta's cumulative net position through the day (receipts minus payments, in millions) is: 10:00 -150; 12:00 -320; 14:00 -210; 16:00 -480; 18:00 +60. It started the day with 300 million of central bank reserves and has 200 million of available intraday credit. Which statement is correct?

Maximum intraday usage is the largest cumulative net outflow, 480 million at 16:00. Reserves of 300 million plus credit of 200 million give 500 million of sources, leaving 20 million of headroom. The end-of-day surplus is irrelevant to the peak requirement.

  1. AMaximum intraday usage is 480 million, and it is covered by reserves plus credit with 20 million of headroomCorrect
  2. BMaximum intraday usage is 480 million, and it is covered by reserves plus credit with 20 million shortfall
  3. CMaximum intraday usage is 320 million, and it is covered with 180 million of headroom
  4. DMaximum intraday usage is 60 million, so no sources are needed

Explanation

The peak net cumulative debit is 480 million at 16:00. Available sources are 300 + 200 = 500 million. Headroom is 500 - 480 = 20 million. The 320 figure uses an earlier non-peak point, and the 60 million is the ending surplus, not the maximum usage.

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