COMM 329 Lecture Notes - Lecture 3: Market Liquidity, Interest Rate Risk, Basel Iii
29 Aug 2016
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Overall fi b/s management, liquidity (q), and liquidity management. Market liquidity: refers to how easily (cheaply) can financial assets/liabilities be bought & sold without greatly impacting their prices. (can you buy/sell stocks or do you have to wait 10 minutes?) Balance sheet liquidity: the extent and adequacy of a fi"s liquid assets to cover payment obligations, on short notice, with predictable prices. (do you hold las?) Funding liquidity: the ability of a fi to raise funds in the money markets at a reasonable risk premium. (most important. ) A discretionary b/s item are assets & liabilities over which the firm (usually [i. e. under normal circumstances]) has considerable short-term (i. e. very quickly!) control in terms of level of holding, but not the rate of the holding. Must be willing to accept the prevailing market rate! A non-discretionary b/s item is an asset or liability over which the firm does not have short-term control in terms of level of holding or rate.
