CRA Liquidity Risk Management 2

Question 1

Intraday liquidity risk refers to:

Accepted Answer

The risk of being unable to meet payment obligations during the business day when they fall due

Answer

Intraday liquidity risk is the risk that a firm cannot meet time-critical payment obligations during the day, potentially causing payment system gridlock.

Question 2

Which of the following assets is NOT typically eligible as a High-Quality Liquid Asset (HQLA) under Basel III?

Accepted Answer

Investment-grade corporate bonds rated below AA-

Answer

Only corporate bonds rated AA- or higher qualify as Level 2B HQLA; bonds rated below AA- do not meet the eligibility threshold.

Question 3

A Contingency Funding Plan (CFP) is primarily designed to:

Accepted Answer

Identify alternative funding sources and specify actions to be taken during a liquidity crisis

Answer

A CFP documents the triggers, escalation procedures, funding sources, and actions a bank will deploy in response to a liquidity stress event.

Question 4

Asset-liability mismatch risk arises primarily when:

Accepted Answer

Short-term liabilities are used to fund long-term assets, creating a structural refinancing gap

Answer

Asset-liability mismatch occurs when liabilities mature before the assets they fund, exposing the bank to rollover and refinancing risk.

Question 5

In liquidity risk management, a bank's survival horizon represents:

Accepted Answer

The length of time the bank can sustain operations using its liquidity buffer without external market access

Answer

The survival horizon measures how long a bank can continue operating in a stress scenario relying solely on its existing liquidity reserves without new funding.

(CRA) Certified Risk Analyst Practice Test

(CRA) Certified Risk Analyst Practice Test

CRA Liquidity Risk Management 2