Funding Liquidity Risk - From Measurement to Management
Center for Financial Studies Research Seminar Series
Dr. Wei Chen
Head of Banking Risk Product Management
SAS Institute, Inc.
*Reception immediately following the seminar.
Abstract: Funding liquidity risk management is the management of the bank’s ability to meet its obligations as they come due without incurring large losses. Liquidity risk is usually a consequential risk from the failure of other risks. On the other hand, failure to manage liquidity properly can quickly lead to solvency concerns. The lesson from the recent financial crisis proves that liquidity risk management is of paramount importance. Regulators have increased attention to funding liquidity risk because of the interconnection of the financial system. This talk gives an overview of the new research and practice in liquidity risk measurements and management. It will start with the two regulatory liquidity ratios followed by a new liquidity tail risk measures called Cash Liquidity at Risk. The talk will also introduce a few optimal liquidity hedging execution and hedging portfolio methods. It will conclude with a discussion on the liquidity risk pricing and cost allocation in the risk-based valuation and performance analysis framework.
Speaker’s Bio: Dr. Wei Chen currently manages global risk products at SAS Institute, Inc. He works with financial institutions and internal development teams on risk methodology and system implementation. Before that he led the risk analytics research and development for both banking and insurance solutions at SAS. Since he joined SAS as a senior financial economist in 2001, he has worked on various areas of risk management including market risk, credit risk, liquidity risk, asset liability management, and enterprise risk. In addition to risk analytics, he is also instrumental on risk data modeling and system architecture for the implementation of risk management techniques. Dr. Chen is active in risk methodology and technology research and has many publications in financial risk journals and conference proceedings. He also has several granted and submitted risk methodology and system patents. He earned his Ph.D. from the University of Iowa where his primary research was on econometric models of fixed-income securities and credit risk. Prior to his graduate education, he worked as an assistant manager at Mitsui and Co, Ltd, a major Japanese trading company. Dr. Chen is a certified financial risk manager. He is also a co-director of the North Carolina chapter of Global Association of Risk Professionals (GARP), vice chair of the financial service section with INFORMS, and associate editor of Journal of Risk Model Validation.