Measuring systemic risk-adjusted liquidity (SRL)—A model approach

Little progress has been made so far in addressing—in a comprehensive way—the negative externalities caused by excessive maturity transformation and the implications for effective liquidity regulation of banks. The SRL model combines option pricing theory with market information and balance sheet da...

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Veröffentlicht in:Journal of banking & finance Jg. 45; S. 270 - 287
1. Verfasser: Jobst, Andreas A.
Format: Journal Article
Sprache:Englisch
Veröffentlicht: Amsterdam Elsevier B.V 01.08.2014
Elsevier Sequoia S.A
Schlagworte:
Banking
Banking law
Banks
Decision making models
Extreme value theory
Financial contagion
Financial services
Funding
Insurance
Insurance premiums
Liquidity
Liquidity regulation
Liquidity risk
Macroprudential policy
Markets
Maturity
Net Stable Funding Ratio (NSFR)
Price theory
Prices
Regulation
Regulation of financial institutions
Risk
Risk adjustment
Risk assessment
Risk management
Studies
Systemic risk
Transformation
C46
G21
G13
G01
Systemic risk
G58
Financial contagion
G28
Macroprudential policy
Extreme value theory
Net Stable Funding Ratio (NSFR)
Liquidity regulation
Liquidity risk
C51
ISSN:0378-4266, 1872-6372
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Beschreibung
Zusammenfassung:Little progress has been made so far in addressing—in a comprehensive way—the negative externalities caused by excessive maturity transformation and the implications for effective liquidity regulation of banks. The SRL model combines option pricing theory with market information and balance sheet data to generate probabilistic measure of systemic liquidity risk. It enhances price-based liquidity regulation by linking a bank’s maturity mismatch impacting the stability of its funding with those characteristics of other banks, subject to individual changes in risk profiles and common changes in market conditions impacting funding and market liquidity risk. This approach can then be used (i) to quantify an individual institution’s time-varying contribution to expected losses from system-wide liquidity shortfalls and (ii) to price insurance premia that provide incentives for banks to internalize the social cost of their individual funding decisions.
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ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2014.04.013