The financial crisis at the end of last decade has called for a comprehensive liquidity risk management framework. The challenge not only lies in finding appropriate liquidity risk measures but more importantly how to apply these measures to implement a risk based liquidity management. A core...

In this paper we describe methods of decomposing risk into subcomponents such as contributing instruments, subportfolios or underlying risk factors e.g., equity, foreign exchange, economy-wide systematic and interest rate risk factors. The Euler allocation principle for allocation of instrument...

Risk aggregation is the roll-up of low-level risks or sub-risks to higher levels. Risk management for banks or insurance institutions involves risk measurement and risk control at the individual risk level, including market risk, credit risk, and operational risks and also the aggregated risk of...

The management of a liquid asset portfolio that can be used to generate counterbalancing capacity in liquidity distress is quickly emerging as a core function in banks. The new Basel III liquidity risk regulation underscores the importance in banks managing a liquidity contingency buffer. The...