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

Andreas Jobst ()

Journal of Banking & Finance, 2014, vol. 45, issue C, 270-287

Abstract: 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.

Keywords: Systemic risk; Liquidity risk; Net Stable Funding Ratio (NSFR); Extreme value theory; Financial contagion; Macroprudential policy; Liquidity regulation (search for similar items in EconPapers)
JEL-codes: C46 C51 G01 G13 G21 G28 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Working Paper: Measuring Systemic Risk-Adjusted Liquidity (SRL): A Model Approach (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:45:y:2014:i:c:p:270-287

DOI: 10.1016/j.jbankfin.2014.04.013

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