Liquidity risk

A/TYPES OF RISKS LIQUIDITY RISK: Liquidity risk for banks mainly manifests on account of the following: Market liquidity risk: The risk that a bank cannot easily offset or eliminate a position at the prevailing market price because of inadequate market depth or market disruption. Though the importance of liquidity risk is well recognized, it eludes a comprehensive definition. The term liquidity is used across the mar-ket for different purposes, which means that Liquidity Risk itself is defined dif-ferently and depends very much on the context in which it is used. Liquidity risk is sometimes referred to as inability of the bank to convert an asset into cash at a reasonable time at a specific price. The cash position of the firm is an important…

hoarding cash. On one hand, to hoarding cash, the company may delay the payroll and work has ground to a halt. On the other hand, selling assets may cause company suffer big lose. Assets that are difficult to sell in an illiquid market carry a liquidity risk since they cannot be easily converted to cash at a time of need. Liquidity risk may lower the value of certain assets or businesses due to the increased potential of capital loss. Therefore, high liquidity risk could cause TCL suffer huge…

in valuable economic activities and their major concerns remain their survival and profitability. On the asset side of the balance sheet, banks guarantee the smooth flow of funds by lending to deficit spending units while providing liquidity to savers on the liability side. In addition, banks provide payment and settlement systems which facilitate trade. However, by ensuring the productive investment of capital and the profitability of other varied functions…

guideline of theoretical elements for the empirical analysis of liquidity risk and stock return. There are a few literature from variety researchers had done the analytical framework, thus some important models from researchers will be useful in this study Pastor, L. & Stambaugh, R. F. (2003), was used those variables to investigate the liquidity risk and expected stock returns, also realized that the average return on stocks with high sensitivities to liquidity exceeds that for stocks with low…

Health-based regulations In the past eras the health effects of the consumption of tobacco and its related products were ignored (Bates, et al., 2003). The level of awareness of the health effects and risk posed by the consumption or exposure to the consumption of such products was limited. Few people were aware of what tobacco and related products could do to their bodies, but this has changed in the recent past (Kessler, et al., 1996). With sensitization and creation of awareness many people…

used the ADR as a substitute because an American investor would only be able to purchase the stock in the form of an ADR, mutual fund, or ETF. Samsung is a company that produces a large array of products including TV’s, Laptops, Phones, and other electronics. Currently, they are experiencing some scrutiny for their latest phone, it had an event where one of their phones actually exploded. This caused a major recall for the phone and sank the stock price. The ADR is now trading at $1,250 a share.…

Based on Bloomberg data, the gross margin of Big Lots for 2013, 2014 and 2015 increased a little, from 39.17% to 29.83%. Yet, net income margin decreased by 9.7% from 2013 to 2014, but recovered by 24.7% from 2014 to 2015. This fact may indicate that the competition faced by Big Lots did have a material impact on their operating performance; however, their management made successful decisions in their operational strategies, leading to the recovery in 2015. As for the liquidity of Big Lots,…

Financial Risk Analysis In addition, ABC Community Banks financial risks include market, credit and liquidity risks. Interest rate risk, a byproduct of market risk, occurs when the U.S. Federal Reserve alters interest rates (Elliott, 2012). Consequently, as rates increase the profit margin earned by ABC Community Bank decreases, negatively affecting the company’s net income and balance sheet (Investopedia, 2015a). Depending on ABC Community Banks reserves, the impact of interest rate changes…

Risk and Controls Any good CFO considers both risks and controls. On a personal level, there is a lot less that can go wrong than there is in any firm. However, there is no reason why those things should not be considered. Life always has a way of teaching you how you are not as bulletproof as you imagine yourself to be. Risk management just makes these interesting lessons sting a lot less. Realistically, taking a moment to analyze where things can go wrong will save you lots of time…

3.4 Risks Every system comes with numerous risks and HVPS is not excluded. HVPS faces risks such as liquidity, legal, operational and credit. To minimize liquidity risk, HVPS provide functions such as account inquiry, balance warning and business queuing which helps to improve liquidity management. HVPS have taken measures such as business limitation, account balance control and debiting control to strengthen the management of credit risk. Whereas to prevent legal risk, People’s Bank of China…