Liquidity Risk: Measurement and Management

<body stylesrc="../_private/template_title.htm" topmargin="10" leftmargin="10" bgcolor="#FFFFFF" link="#333366" vlink="#000000" alink="#000000"> <div align="left"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" id="table4"> <tr> <td width="780" align="center"> <div align="center"> <table border="0" cellpadding="5" cellspacing="0" height="206" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table5"> <tr> <td align="right" height="198" width="1%"> <p align="left"> <img border="0" src="../images/book_matz_and_neu_(2006).jpg" width="141" height="200"></td> <td valign="top" align="left" height="198"> <table border="0" cellspacing="1" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0" id="table6"> <tr> <td colspan="3" width="0%"> <p class="book_title">Liquidity Risk<font size="3"><br> Measurement and Management</font></p></td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"><img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> <td width="52%" class="book_details_tags" valign="top" height="144" align="left" rowspan="9"> <map name="FPMap2"> <area href="../main/ratings.htm" shape="rect" coords="73, 0, 163, 32"> </map> <img border="0" src="../images_title/matz_a25.gif" usemap="#FPMap2" width="175" height="175"></td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" valign="top" height="16" align="left" width="50%"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" height="32" align="center" width="50%" rowspan="2"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> </table> </td> </tr> </table> </div> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="468" id="table7"> <tr> <td> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> <table border="0" cellpadding="5" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table8"> <tr> <td width="50%" valign="top"> <p align="left" class="body"><strong style="font-weight: 400">Liquidity risk is difficult to write about—let alone manage—because it can manifest itself in so many ways. Little has been published on the subject, which makes this book a godsend. </strong></p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="125" align="left" id="table9"> <tr> <td width="120"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td><td width="5"> </td> </tr> </table> <p align="left" class="body"><strong style="font-weight: 400">Focusing on banks, the book walks readers through proven techniques for assessing and managing liquidity risk. These aren't pie-in-the-sky techniques or vaporware technology. In a very practical, methodical way, the authors lay out what is being done today in major financial institutions—techniques including balance sheet metrics, maturity mismatch analysis and scenario analysis. The book covers policies and procedures, contingency planning and so much more.</strong></p> <p align="left" class="body"><strong style="font-weight: 400">To round out the book and offer alternative perspectives, authors Matz and Neu recruited a number of professionals to contribute chapters. There is a case study looking at how one bank managed a funding crisis. Another chapter describes how UBS manages liquidity risk. There are ten contributed chapters in all.</strong></p> <p align="left" class="body"><strong style="font-weight: 400">The authors might have done a better job selecting those contributors. One of them, Louis Raffis, a senior vice president at KeyCorp, borrowed a definition for credit risk from </strong><strong>riskglossary.com</strong><strong style="font-weight: 400"> without citation. </strong></p> <p align="left" class="body"><strong style="font-weight: 400">In writing book reviews, I occasionally come across instances of plagiarism. When I do, I usually set the book aside and don't review it. In this case, I think that would unfairly penalize Matz and Neu, who have worked hard to compile an outstanding book. It would also hurt the many readers who would benefit from finding out about this book. Since I am the injured party in this case, no one can say I am turning a blind eye to an ethical lapse. I have noted it here, and that should suffice.</strong></p> </td> <td width="50%" valign="top" class="body" rowspan="2"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table10"> <tr> <td width="100%" bgcolor="#333366"> <p class="header_yellow" align="center">Contents</td> </tr> <tr> <td width="100%" class="explanatory_text"> <table border="1" cellpadding="0" cellspacing="5" style="border-collapse: collapse" bordercolor="#CCCCFF" bgcolor="#CCCCFF" width="100%" id="table11"> <tr> <td class="contents_expanded"> <p class="contents">1. Introduction</p><p class="contents"> <b>I. MEASURING AND MONITORING LIQUIDITY RISK. </b> </p> <p class="contents"> 2. Liquidity Risk Measurement</p><p class="contents"> 3. Scenario Analysis and Stress Testing</p><p class="contents"> <b>II. MANAGING LIQUIDITY RISK. </b> </p><p class="contents"> 4. Monitoring and Controlling Liquidity Risk</p><p class="contents"> 5. Liquidity Risk Management Strategies and Tactics </p> <p class="contents"> 6. Contingency Planning</p><p class="contents"> 7. Market Developments in Banksâ ™ Funding Markets</p> <p class="contents"> <b>III. CASE STUDIES AND ALTERNATIVE VIEWS. </b> </p> <p class="contents"> 8. A Concept for Cash Flow and Funding Liquidity Risk</p> <p class="contents"> 9. The Liquidity Impact of Derivatives Collateral</p> <p class="contents"> 10. Modeling Non-maturing Products (Martin M. Bardenhewer). </p> <p class="contents"> 11. The Net Cash Capital Tool in Bank Liquidity Management </p> <p class="contents"> 12. Managing a Funding Crisis: Citizens First Bancorp, a case Study 1989-1994</p><p class="contents"> 13. Liquidity Management at UBS</p><p class="contents"> 14. Sound Liquidity Management as an Investment Criterion</p> <p class="contents"> <b>IV. CUTTING EDGE. </b> </p><p class="contents"> 15. Dynamic Mdoeling and Optimization of Non-maturing Accounts</p> <p class="contents"> 16. Liquidity Risk and Classical Option Pricing Theory</p> <p class="contents"> <b>V. CONCLUSION. </b> </p><p class="contents"> 17. View from the Mountaintop</p></td> </tr> </table> </td> </tr> </table> <p align="left" class="body"><strong style="font-weight: 400">Otherwise, this is an outstanding book on liquidity risk. It should be read by risk managers throughout the banking industry. </strong><b>[December 22, 2006]</b></p> <p align="center" class="body"> </p> </td> </tr> <tr> <td width="50%" valign="bottom"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table12"> <tr> <td width="100%"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> </td> </tr> </table> </td> <td>  </td> </tr> </table> </div> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table13"> <tr> <td width="50%" bgcolor="#FFFFCC" align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" bgcolor="#FFFFCC" id="table14"> <tr> <td> <p class="body" style="margin-bottom: 6; margin-left:10"><b><font color="#333366" size="3">For related books, see sections:</font></b></p> <p class="bullet" style="margin-top:5; margin-bottom:5; margin-left:10"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/risk_management_liquidity_risk.htm">Risk Management - Liquidity Risk</a></p> <p class="bullet" style="margin-top:5; margin-bottom:5; margin-left:10"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/risk_management_alm.htm">Risk Management - Asset-Liability Management</a></p> <p class="bullet_line_space" style="margin-left: 10"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/risk_management_general.htm">Risk Management - General</a></td> </tr> </table> </td> </tr> </table>  <table border="0" style="border-collapse: collapse" width="100%" cellpadding="0" id="table1" bgcolor="#FFFFFF"> <tr> <td colspan="2" height="12"> <p style="margin-top: 0"> </td> </tr> <tr> <td align="right"> <p align="left" style="margin-bottom: 2px"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font size="1" color="#000000" face="Arial">Ads by Contingency Analysis.</font></a></td> <td align="left"> <p align="right" style="margin-bottom: 2px"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font size="1" color="#000000" face="Arial">Advertise on this site.</font></a></td> </tr> <tr> <td align="center" colspan="2">  <iframe src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=iframe" allowtransparency="true" background-color="transparent" style="margin: 0px; padding: 0px; border-width: 0px" width="300" height="250" frameborder="0" marginwidth="0" marginheight="0" scrolling="no"> <![if lt IE 4]> <script src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=js" type="text/javascript"> </script> <noscript> <a href="http://servedbyadbutler.com/go2/;ID=147917;size=300x250;setID=93136"> <img src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=img" border="0" height="250" width="300" alt=""></a> </noscript><![endif]> </iframe>   </td> </tr> </table> <p align="center" style="margin-top: 20"> <map name="FPMap0_I1"> <area href="http://www.riskbook.com" shape="rect" coords="0, 0, 184, 29" target="_top"></map> <img border="0" src="../images/open_book_riskbook.gif" usemap="#FPMap0_I1" width="185" height="30"></p> <p class="a" align="center"><font face="Arial" size="2"><a href="../main/disclaimer.htm">disclaimer</a></font></p> <p class="a" align="center"><span class="verdana10">website:</span> <a target="_top" href="http://www.contingencyanalysis.com"> <font size="2" face="Arial">http://www.contingencyanalysis.com</font></a><br> <span class="verdana10">books direct link:</span> <a target="_top" href="http://www.riskbook.com"><font size="2" face="Arial">http://www.riskbook.com</font></a><br> copyright <font face="Times New Roman">©</font> Contingency Analysis, 1996 - current</p> <p class="a" align="center"><map name="FPMap1_I1"> <area target="_top" href="http://www.contingencyanalysis.com" shape="rect" coords="0, 0, 240, 88"> </map><img border="0" src="../images/logo_book_white.gif" usemap="#FPMap1_I1" width="241" height="89"></p>  </body>