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Financial Risk Manager Part 2

Financial Risk Manager Part 2

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A bank supplies a line of credit of 10millionthatcurrentlyhas10 million that currently has 10millionthatcurrentlyhas6 million already drawn. The bank determines that there is a 65% probability the customer will use the remaining line of credit. The bank's cost of funding for the liquidity cushion is 16 bps. If the bank charges contingent commitments based on the probability of a drawdown, what should the charge for liquidity be for this line of credit?

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