Stress testing / Liquidity and funding risk [33]

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Bullet points include: Market and funding liquidity risk are clearly linked But different in that a non-levered institution should not be exposed to funding risk but is exposed to impact of fluctuations in market prices caused by changes in (the market price of) market liquidity Note, most institutions (even pension funds / annuity writers) are exposed to some liquidity risk as potentially need to liquidate exposures if in regulatory distress C.f. arguments between VaR and TVaR discussed in ERM course and who suffers in the event of a loss beyond level that triggers default

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