Liquidity Stress Testing

Aug 23, 2010
Category: General
Posted by: cdgradm
Complete Liquidity Stress Testing solution

CD Financial Technology (CDFT) has implemented a full scale Liquidity Stress Testing solution (analyses and reporting) for an AAA-rated customer. The customer presented the case (including scenario building) and reporting templates to their national regulator in June 2010 and the bank received very positive feedback both for the test itself and for the comprehensiveness of the scenarios.

The solution builds on path Monte Carlo simulation capabilities of the R/V Platform developed by CDFT. In the analyses all key factors driving revenues and costs of lending, funding and investment activities were simulated over a long planning horizon. The impacts on P/L and the capital ratios were established and conditions that could potentially lead to a requirement for new capital were identified and ranked on a relative scale (of probability).

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