Fixing instrument and Liquidity: Difference between pages

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''Risk management''
1. ''Assets.''
 
An asset's ability to be turned into cash quickly and without significant loss compared with current market value.
 
Cash itself is the most liquid of assets.
 
After that, the next most liquid asset is often high quality central government debt, for example gilts.
 
 
2. ''Markets.''
 
In relation to a market, the extent to which large quantities of the asset traded in the market can be bought or sold at any time, with low transaction costs, and without affecting the market price.
 
 
3. ''Short-term financial health.''
 
An entity’s ability to pay its obligations when they fall due, especially in the short term.
 
 
4. ''Medium-term financial health.''
 
An entity's ability to source additional funds to meet its obligations, including in the medium and longer term.
 
 
5. ''Financial measures.''
 
A financial measure designed to quantify an entity's ability to meet its obligations when they fall due.
   
   
A fixing instrument - or fixing derivative - is one which hedges an exposure to a variable market rate or market price by effectively fixing a hedged market rate for it.
* For non-financial organisations, simple measures of liquidity include the ''current ratio'' and the ''quick ratio''.
* For banks and other financial institutions, liquidity measures include those which identify how long the bank could survive if wholesale funds were to dry up and retail funding was heavily stressed. This period is known as the ''survival period''.
 


Examples include forward contracts, futures contracts, FRAs and swaps. 
== See also ==
* [[Authorisation]]
* [[Authority limits]]
*[[Cash]]
* [[Cash and cash equivalents]]
*[[Cash balance]]
*[[Cash flow]]
* [[Cash forecasting]]
* [[Cash pool]]
* [[CRD IV]]
* [[Current ratio]]
* [[Deep market]]
* [[Emergency liquidity assistance]]
* [[Flight to liquidity]]
* [[Funding]]
* [[Funding liquidity risk]]
* [[Funds]]
* [[Gilts]]
* [[Headroom target]]
* [[Illiquid]]
* [[Individual Liquidity Guidance]]
* [[Insolvency]]
* [[Leverage]]
* [[Liquid]]
* [[Liquidate]]
* [[Liquidation]]
* [[Liquidity buffer]]
* [[Liquidity Coverage Ratio]]
* [[Liquidity fee]]
* [[Liquidity Fund]]
* [[Liquidity gap]]
* [[Liquidity insurance]]
* [[Liquidity investment]]
* [[Liquidity management]]
* [[Liquidity preference]]
* [[Liquidity premium]]
* [[Liquidity risk]]
* [[Liquidity run]]
* [[Liquidity stress]]
* [[Liquidity upgrade]]
* [[Market liquidity risk]]
* [[Money management]]
* [[Net Stable Funding Ratio]]
* [[Quick ratio]]
* [[Run]]
* [[Security]]
* [[Solvency]]
* [[Stress]]
* [[Supply chain finance]]
* [[Survival period]]
* [[Yield]]


Contrasted with insurance-type instruments, such as an options.


== Other resources ==
* [https://www.treasurers.org/hub/treasurer-magazine/liquidity-first-three-tips-for-treasurer Liquidity first: three tips for treasurers, The Treasurer Web exclusive, 2020]


== See also ==
*[[Media:2015_06_June_-_Safety_first.pdf| Safety first, The Treasurer, 2015]]
* [[CPI fixing swap]]
* [[Derivative instrument]]
* [[Fixing]]
* [[Forward contract]]
* [[Forward rate agreement]]
* [[Futures contract]]
* [[Insurance]]
* [[Opportunity loss]]
* [[Option]]
* [[Swap]]


[[Category:Accounting,_tax_and_regulation]]
[[Category:Liquidity_management]]
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]
[[Category:Financial_products_and_markets]]

Revision as of 09:45, 21 July 2022

1. Assets.

An asset's ability to be turned into cash quickly and without significant loss compared with current market value.

Cash itself is the most liquid of assets.

After that, the next most liquid asset is often high quality central government debt, for example gilts.


2. Markets.

In relation to a market, the extent to which large quantities of the asset traded in the market can be bought or sold at any time, with low transaction costs, and without affecting the market price.


3. Short-term financial health.

An entity’s ability to pay its obligations when they fall due, especially in the short term.


4. Medium-term financial health.

An entity's ability to source additional funds to meet its obligations, including in the medium and longer term.


5. Financial measures.

A financial measure designed to quantify an entity's ability to meet its obligations when they fall due.

  • For non-financial organisations, simple measures of liquidity include the current ratio and the quick ratio.
  • For banks and other financial institutions, liquidity measures include those which identify how long the bank could survive if wholesale funds were to dry up and retail funding was heavily stressed. This period is known as the survival period.


See also


Other resources