hard · Frm Part 2 Risk & Investment Management
In the context of Liquidity Risk, the 'Denominator Effect' refers to which of the following scenarios?
- A bank's inability to roll over its short-term wholesale funding during a systemic freeze.
- The inability to meet margin calls due to a lack of available high-quality liquid assets (HQLA).
- A sharp decline in public equity prices causes the weight of illiquid private assets in a portfolio to mechanically rise above its target limit.
- The increase in the bid-ask spread as a result of a decrease in market depth.
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