Liquidity stress testing: a model for a portfolio of credit lines

Marco Geidosch

Journal of Risk Model Validation

Abstract: ABSTRACT In this paper, we demonstrate how cash outflows due to credit lines can be modeled in a liquidity stress test. Our model is based on bootstrapping from a portfolio time series of daily credit line drawdowns. Key features of our model are (i) that it does not rely on any distributional assumptions or any complex parameter estimation, ie, the model risk is low; (ii) that it is intuitive and straightforward to implement; (iii) that it is very flexible and allows the portfolio's free amount to be reduced during the stress test horizon; and (iv) that it calculates an outflow profile with daily granularity. In a detailed simulation study, we demonstrate the reasonable behavior of the model output toward changes in several input parameters.

References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.risk.net/journal-of-risk-model-validat ... olio-of-credit-lines (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ5:2437481

Access Statistics for this article

More articles in Journal of Risk Model Validation from Journal of Risk Model Validation
Bibliographic data for series maintained by Thomas Paine ().