Valuation and Risk
Liquidity and Funding Risk
The funding cost of margin, meeting margin calls, sourcing collateral, and the treatment under the LCR and NSFR.
Practitioner3 pagesAdvanced1 page
1Liquidity and Funding Risk
- PractitionerFunding Variation and Initial MarginFunding liquidity risk is the risk of being unable to find the cash for payments or collateral, and demands for additional collateral are one cause in derivatives.
- PractitionerHandling Margin CallsIn bilateral trades, a call runs in order through valuation, calculation of the required amount, the call, agreement on the amount, and delivery, and each party calculates the amount itself.
- PractitionerSourcing and Substituting CollateralCollateral can be sourced from assets a firm holds, by reusing collateral it has received, or through collateral transformation.
- AdvancedDerivatives in LCR and NSFRIn both the LCR and the NSFR, derivatives are counted in separate items for the payments and collateral transfers they generate and for their market value as assets and liabilities.