Structural liquidity risk is a material risk resulting from the
core banking business of taking in short-term deposits and lending
out long-term loans, thus allowing a maturity mismatch between
assets and liabilities. At some point the long-term loans will
require refinancing and the institution is at risk of an adverse
development of refinancing costs.This book proposes a model for the
quantification of structural liquidity risk and describes the
underlying methodology and assumptions for stressing the
refinancing costs. The change in present value between closing open
liquidity positions under stressed refinancing costs compared to
current costs is the calculated impact on risk-bearing capacity.
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