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Application Research on Dynamic Liquidity Risk Stress Test of Commercial Banks Based on Gravity Model

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DOI: 10.23977/ferm.2021.040305 | Downloads: 7 | Views: 151

Author(s)

Xu LIAO 1, Ziyu Zhou 1

Affiliation(s)

1 School of Business Administration, Northeastern University, Shenyang, Liaoning, 111004, China

Corresponding Author

Xu LIAO

ABSTRACT

Dynamic liquidity risk is the most fundamental risk faced by banks. Stress testing is a quantitative analysis method for tail risks. Among various dynamic liquidity risk management tools, liquidity stress testing is a very effective management tool, and its in-depth study will help commercial banks fully understand the degree of losses they will suffer in future extreme events. On the basis of establishing the gravity model of assets and liabilities, this paper takes commercial banks as the research object and the excess deposit reserve ratio as the index to measure the dynamic liquidity risk, and makes an empirical study on the liquidity stress test of commercial banks, and analyzes the empirical results of stress test in detail. According to the results of stress test, this paper gives the countermeasures of dynamic liquidity risk management of commercial banks from three angles.

KEYWORDS

Gravity model, Commercial banks, Dynamic liquidity risk, Stress testing

CITE THIS PAPER

Xu LIAO, Ziyu Zhou. Application Research on Dynamic Liquidity Risk Stress Test of Commercial Banks Based on Gravity Model. Financial Engineering and Risk Management (2021) 4: 35-40. DOI: http://dx.doi.org/10.23977/ferm.2021.040305

REFERENCES

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