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Answer: $0.88 billion.
To calculate the stressed liquidity asset buffer: **Starting liquid assets:** $1.0 billion **Outflows:** - Deposit withdrawals: $150 million - Margin/collateral calls: $60 million - **Total outflows:** $210 million **Inflows:** - Loan repayments: $80 million - Liquidity facility used: $10 million (this is an inflow as it provides additional liquidity) - **Total inflows:** $90 million **Net liquidity position:** $1.0 billion - $210 million + $90 million = $880 million = $0.88 billion The stressed liquidity asset buffer is $0.88 billion.
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Firm A has $1 billion in highly liquid assets. In a sudden stressed scenario, it estimates that retail customers will withdraw $150 million in deposits, and retail customers will be able to make $80 million of loan repayments. Firm A must deal with $60 million of margin and collateral calls on its derivatives transactions due to falling collateral values and greater volatility of the underlying assets. In addition, it has utilized $10 million of a total $100 million liquidity facility. What is the estimate of Firm A's stressed liquidity asset buffer?
A
$0.80 billion.
B
$0.88 billion.
C
$0.90 billion.
D
$0.96 billion.
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