Optimal liquidity reserve with funding liquidity risk
In this article, we take the funding liquidity risk into account when determining the optimal liquidity reserve ratio for a commercial bank. A simple continuous-time model is developed, and a discrete-time model is built as a benchmark. We find that compared with the continuous-time model, the discrete-time model would generate a higher reserve ratio when the illiquid project has low haircut rate, and a lower reserve ratio when the project has high haircut rate.
Year of publication: |
2013
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Authors: | Zhang, Dewei ; Wu, Chongfeng ; Zhou, Chunyang |
Published in: |
Applied Economics Letters. - Taylor & Francis Journals, ISSN 1350-4851. - Vol. 20.2013, 16, p. 1449-1452
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Publisher: |
Taylor & Francis Journals |
Saved in:
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