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A new multi-factor risk model to evaluate funding liquidity risk of banks

By Malick Fall and Jean-Laurent Viviani

Abstract

International audienceThe present paper investigates funding liquidity risk of banks. We present a new statistical multi-factor risk model leading to three new funding liquidity risk metrics, thanks to liquidity gap's probability distribution analysis. We test our model on a large sample composed of 593 US banking companies, this allows us to identify some stylized facts regarding the evolution of liquidity risk and its relationship with the size of banking companies. Our main motivation is to develop ‘the contractual maturity mismatch’ monitoring tool proposed within the Basel III reform

Topics: funding liquidity risk, Basel III, liquidity gap, financial institution, JEL: C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C53 - Forecasting and Prediction Methods • Simulation Methods, JEL: G - Financial Economics/G.G1 - General Financial Markets/G.G1.G17 - Financial Forecasting and Simulation, JEL: G - Financial Economics/G.G2 - Financial Institutions and Services/G.G2.G21 - Banks • Depository Institutions • Micro Finance Institutions • Mortgages, JEL: G - Financial Economics/G.G2 - Financial Institutions and Services/G.G2.G28 - Government Policy and Regulation, [SHS.ECO]Humanities and Social Sciences/Economics and Finance
Publisher: 'Informa UK Limited'
Year: 2015
DOI identifier: 10.1080/1351847X.2014.996656
OAI identifier: oai:HAL:halshs-01141333v1
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