Probability of loss to a bank’s earnings or equity on account of the movement of interest rates is termed as interest rate risk. Movement in the interest rates are driven by the liquidity and market situations and are also guided by monetary policy actions namely, changes in policy rates or...

The likelihood of not getting the desired funding at an appropriate cost or the probability of an undue loss of value in the event of a fire sale of assets is recognised as the liquidity risk. Moreover, a flat idiosyncratic liquidity risk does not necessarily translate into a similar risk...