Investment Function, Reserves, Intraday Liquidity, Stress Testing, and Dealer-Bank Failure
Free GARP FRM Part II lesson in Liquidity and Treasury Risk Measurement and Management. 23 min read, ~3,449 words.
Investment function trades two roles: liquidity reserve (short Treasuries, agencies, HQLA) and earnings supplement (longer corporates, MBS, munis). Choice is constrained by yield curve, duration tolerance, and capital treatment. Reserve management balances liquidity supply (deposits, maturing securities, repo) against liquidity demand (loan demand, deposit run-off, drawn lines). Three diagnostic methods...
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What this lesson covers
- Content
- Example 1
- Example 2
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
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