Which of the following are measures of liquidity risk

Which of the following are measures of liquidity risk

I. Liquidity Coverage Ratio

II. Net Stable Funding Ratio

III. Book Value to Share Price

IV. Earnings Per Share
A . III and IV
B . I and II
C . II and III
D . I and IV

View Answer

Answer: B

Explanation:

In December 2009 the BIS came out with a new consultative document on liquidity risk.

Given the events of 2007 – 2009, it has been clear that a key characteristic of the financial crisis was the inaccurate and ineffective management of liquidity risk

The paper two separate but complementary objectives in respect of liquidity risk management: The first objective relates to the short-term liquidity risk profile of institution, and the second objective is to promote resiliency over longer-term time horizons.

The paper identifies the following two ratios – you should be aware of these – though I am not sure if these will show up in the PRMIA exam: