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A new multi-factor risk model to evaluate funding liquidity risk of banks

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  • Malick Fall
  • Jean-Laurent Viviani

Abstract

The present paper investigates funding liquidity risk of banks. We present a new statistical multi-factor risk model leading to three new funding liquidity risk metrics, thanks to liquidity gap's probability distribution analysis. We test our model on a large sample composed of 593 US banking companies, this allows us to identify some stylized facts regarding the evolution of liquidity risk and its relationship with the size of banking companies. Our main motivation is to develop ‘the contractual maturity mismatch’ monitoring tool proposed within the Basel III reform.

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  • Malick Fall & Jean-Laurent Viviani, 2016. "A new multi-factor risk model to evaluate funding liquidity risk of banks," The European Journal of Finance, Taylor & Francis Journals, vol. 22(11), pages 985-1003, September.
    • Handle: RePEc:taf:eurjfi:v:22:y:2016:i:11:p:985-1003
    DOI: 10.1080/1351847X.2014.996656
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    Cited by:

    1. Davide Salvatore Mare & Dieter Gramlich, 2021. "Risk exposures of European cooperative banks: a comparative analysis," Review of Quantitative Finance and Accounting, Springer, vol. 56(1), pages 1-23, January.

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