easy · 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 to improve the systemic NSFR.
- GPs often find 'distressed' opportunities during crashes and call committed capital to take advantage of them.
- LPs are legally required to fund all remaining commitments within 30 days if the market falls by 20%.
- Capital calls are negatively correlated with market volatility by construction.
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