Estimation of liquidity risk in banking

Abstract

This method of modelling liquidity risk uses a ``bottom-up'' approach. Real bank data has been used and transformed for both ease of use and security. Identifying the degree of liquidity risk enables a bank to take action to avert problem areas overall and bring accountability to management in individual units within the institution. Critical problems identified include data availability---the set task is to identify the worst 3 days in 10,000---and possible confounding with market risk.