Liquidity risk: A risk left to be tamed
Résumé
The author reflects on the liquidity risk for banks including its impact on the financial health of the company, its components, and sources. He states that liquidity risk can create peril to the company if neglected, however healthy it may be. He mentions the three main sources of liquidity risk for banks including the existence of embedded options in the balance sheets of banks, structural mismatch of banks financing long-term assets with short-term liabilities, and unanticipated risks.