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

Bank Beta's intraday payment log (in millions) shows, in sequence: opening balance 200; outgoing 350; incoming 100; outgoing 400; incoming 250; outgoing 150; incoming 500. It pledges no further collateral. What is the maximum intraday liquidity usage (largest cumulative net negative movement from opening) and the end-of-day balance?

Peak usage is 650 million and the end-of-day balance is 150 million. Cumulative net flows run -350, -250, -650, -400, -550, then -50, so the deepest point is -650 after the 400 payment. Adding the final net of -50 to the 200 opening balance gives 150 million.

  1. APeak usage 800; end-of-day balance 150
  2. BPeak usage 650; end-of-day balance 150Correct
  3. CPeak usage 650; end-of-day balance 350
  4. DPeak usage 800; end-of-day balance 350

Explanation

Cumulative net movements: -350, -250, -650, -400, -550, -50. Peak net outflow is 650 after the second outgoing payment of 400. Actually final net is -50, so ending balance is 200 - 50 = 150. Peak usage of 800 would sum only outflows 350+400+150=900 incorrectly or ignore inflows; 350 ignores the final net.

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