Bank liquidity risk assessment with Exposed-based Liquidity-at-Risk approach: An application in UK

CHEN, YUXIANG (2017) Bank liquidity risk assessment with Exposed-based Liquidity-at-Risk approach: An application in UK. [Dissertation (University of Nottingham only)]

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Abstract

In this research, liquidity-at-risk (LaR) is applied to assess liquidity risks of six UK banks. Initially, an Exposure-Based model is built to explore the relationship between risk exposure factor fluctuations and bank liquidity gap volatility. Then the fluctuations of significant risk factors for each bank are simulated to generate the distribution of prospective liquidity gap, the basis of LaR calculation. With quarterly data from 2009 to first quarter of 2017, we obtain significant risk factors and relevant coefficients for six UK banks, then the LaRs of these banks are calculated with assistance of Monte Carlo Simulation. The value of LaR represents minimum possible liquidity gap at a given confidence level in next period, and could be regarded as an indicator of bank liquidity risk. For example, the LaR of HSBC at 5% confidence level is estimated at £143.39 billion with bootstrap method, which means the liquidity gap of HSBC in next period is predicted to be larger than £143.39 billion within 95% probability.

Item Type: Dissertation (University of Nottingham only)
Depositing User: Chen, Yuxiang
Date Deposited: 11 Apr 2018 08:37
Last Modified: 17 Apr 2018 14:36
URI: http://eprints.nottingham.ac.uk/id/eprint/45367

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