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Next Generation System-Wide Liquidity Stress Testing

Claus Puhr, Andre Santos, Christian Schmieder, Salih Neftci, Benjamin Neudorfer, Stefan Schmitz and Heiko Hesse

No 2012/003, IMF Working Papers from International Monetary Fund

Abstract: A framework to run system-wide, balance sheet data-based liquidity stress tests is presented. The liquidity framework includes three elements: (a) a module to simulate the impact of bank run scenarios; (b) a module to assess risks arising from maturity transformation and rollover risks, implemented either in a simplified manner or as a fully-fledged cash flow-based approach; and (c) a framework to link liquidity and solvency risks. The framework also allows the simulation of how banks cope with upcoming regulatory changes (Basel III), and accommodates differences in data availability. A case study shows the impact of a "Lehman" type event for stylized banks.

Keywords: WP; bank; solvency; Fixed income securities; option pricing theory; financial markets; puttable bond; extendible bond; discount bond; bond futures; interest rate derivative market; Bonds; Options; Asset prices; Sovereign bonds; Short term interest rates (search for similar items in EconPapers)
Pages: 61
Date: 2012-01-01
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Citations: View citations in EconPapers (22)

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