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Learn about the following:
Why options are often considered risky. The four basic option positions. In, at and out of the money. Intrinsic and time value. Simple uses for options.
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1. Why so much interest?
2. In, at and out of the money
3. Simple uses for options
4. Summary
5. Test
1st November 2009
A contractual cash flow report for a bank will show you that liabilities have shorter maturities than assets. That's because running liquidity risk generally makes money. But it has risks. Lack of confidence can lead to a real shortage of cash. That's why banks hold liquidity buffers. But measuring liquidity risk goes beyond what is contracted. It needs to assess the behaviour of markets and individuals. It's why stress testing is in vogue. Stress testing can't predict the future but it can give you an estimate for your liquidity buffer. It's likely to be a lot bigger than previously and it's going to cost your firm more, that's unless you can pass the cost on through transfer pricing.