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Liquidity Risk - Essay Example

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This essay “Liquidity Risk” explores the type of risk which cannot be dealt with in swift fashion. Liquidity Risk is mainly accrued on the asset and securities which can prevent market loss. This type of risk can be segmented as funding liquidity risk and market liquidity risk…
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Download file to see previous pages On the other side, the market liquidity depends on the calculation of value risk and the length of holding period. So, the risk liability is attached with the issue of funding liquidity which may vary in the case of vast range of transaction (Fight, 421). The risk of liquidity tends to be managed, when market, credit and other risks are considered to be additional. There are several types of risk resolving techniques. These all are incorporated with the life of initial bank risk. The Federal Reserve System provided a banking risk framework designed by six factors. These include, reputational and liquidity risk, legal risks, market risks, credit risks. The structures of risk management are thus reviewed, making use of these risk categories. The supervision group is concerned with the liquidity risk fund, continue the preventive action against the other emerging risk and follow the current risk. All this preventive actions are fixed on revelation by majority of Federal Reserve banks. This process tends to figure on a continuous basis, and as a result, measures to counter the existence of so many opportunities may result to risk (Morrison, 245). The financial risk is related with the possibilities of losing money of shareholder. On the other word, the investors did not have enough return on their investment in the company. This type of situation arises when the cash flow of the company proves inadequate to meet all the financial obligation of the company. At the time of insolvency, the creditors. ...Download file to see next pagesRead More
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