medium · FRM Part 2 Risk & Investment Management
When modeling the liquidity of an alternatives program, why should capital calls be assumed to 'accelerate' during a stressed regime?
- Bank regulators force GPs to call capital immediately in order to improve their systemic NSFR ratios.
- GPs often find 'distressed' opportunities during crashes and call committed capital to take advantage of them.
- LPs are legally required by contract to fund all remaining commitments within 30 days once the market falls 20%.
- Capital call schedules are negatively correlated with realized market volatility purely by mathematical construction.
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