FRSGlobal has introduced contingent gap analysis (CGA). This functionality is part of the liquidity module within FRSGlobal’s unified risk and profitability analysis solution, RiskPro, and will enable the banking, insurance and corporate sectors to thoroughly assess the source of contingency of future cash flows.
The CGA functionality considers customer behaviour under both ‘normal’ and ‘stressed’ market conditions, and qualifies anticipated cash flows according to the source of contingency, which means that users can assess the firm’s liquidity with higher degree of accuracy.
The CGA separates:
- Market contingent flows: cash flows that are subject to the evolution of market risk factors. The market risk factors encompass exchange rates, interest rates, indices and volatilities. These risk factors impact any foreign currency contract, variable rate contract, stock/index contract, derivative and option contract.
- Behaviour contingent flows: cash flows that are subject to counterparty behaviour (such as pre-payments, roll-overs and replications) and counterparty characteristics (including credit enhancements such as collateral, guarantees and close-out netting).
- Deterministic flows: cash flows that are not subject to any expected market, behavioural or counterparty influence.
Thomas Brouwer, head of product management, FRSGlobal, said: “The global financial services industry is faced with a call for better risk management so that the market may become stable again. The addition of CGA to RiskPro means that managers can have a more transparent view of the type of liquidity risk they are exposed to, which is vital for financial institutions to make highly-qualified strategic decisions with confidence.”
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