Measuring Systemic Liquidity Risk and the Cost of Liquidity Insurance /

I construct a systemic liquidity risk index (SLRI) from data on violations of arbitrage relationships across several asset classes between 2004 and 2010. Then I test whether the equity returns of 53 global banks were exposed to this liquidity risk factor. Results show that the level of bank returns...

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Xehetasun bibliografikoak
Egile nagusia: Severo, Tiago
Formatua: Aldizkaria
Hizkuntza:English
Argitaratua: Washington, D.C. : International Monetary Fund, 2012.
Saila:IMF Working Papers; Working Paper ; No. 2012/194
Sarrera elektronikoa:Full text available on IMF
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490 1 |a IMF Working Papers 
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500 |a <strong>On-Campus Access:</strong> No User ID or Password Required 
506 |a Electronic access restricted to authorized BRAC University faculty, staff and students 
520 3 |a I construct a systemic liquidity risk index (SLRI) from data on violations of arbitrage relationships across several asset classes between 2004 and 2010. Then I test whether the equity returns of 53 global banks were exposed to this liquidity risk factor. Results show that the level of bank returns is not directly affected by the SLRI, but their volatility increases when liquidity conditions deteriorate. I do not find a strong association between bank size and exposure to the SLRI - measured as the sensitivity of volatility to the index. Surprisingly, exposure to systemic liquidity risk is positively associated with the Net Stable Funding Ratio (NSFR). The link between equity volatility and the SLRI allows me to calculate the cost that would be borne by public authorities for providing liquidity support to the financial sector. I use this information to estimate a liquidity insurance premium that could be paid by individual banks in order to cover for that social cost. 
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830 0 |a IMF Working Papers; Working Paper ;  |v No. 2012/194 
856 4 0 |z Full text available on IMF  |u http://elibrary.imf.org/view/journals/001/2012/194/001.2012.issue-194-en.xml  |z IMF e-Library