What is Funding liquidity risk in FRM Part 1?

The risk that an institution cannot meet cash, collateral, or margin obligations when due without unacceptable loss. A hedge may be economically sound at maturity yet fail if interim margin calls exhaust available cash.

Funding liquidity risk

FRM Part 1 glossary · Foundations Of Risk Management

Definition

The risk that an institution cannot meet cash, collateral, or margin obligations when due without unacceptable loss.

Funding liquidity risk in plain English

A hedge may be economically sound at maturity yet fail if interim margin calls exhaust available cash.

Learn these first

Capital Asset Pricing Model (CAPM)
Enterprise Risk Management (ERM)

Practice Funding liquidity risk

What specific variety of liquidity risk is being described?

Related FRM Part 1 terms

Alpha
Arbitrage Pricing Theory (APT)
Beta
Capital Asset Pricing Model (CAPM)
Diversification
Economic capital
Enterprise Risk Management (ERM)
Information ratio
Jensen's alpha
Modern portfolio theory (MPT)

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