
Explanation:
The definition provided for "Cash flow at Risk (CFaR)" is inaccurate because it actually describes Liquidity at Risk (LaR). LaR measures the economic losses resulting from the need to cover an unexpected shortfall in cash. In contrast, Cash flow at Risk (CFaR) simply measures the quantity (or volume) of the maximum expected cash shortfall at a given confidence level over a certain time horizon. The other three definitions for liquidity risk, funding cost risk, and liquidity generation capacity are accurate.
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20.9.3. Consider the following four definitions related to liquidity risk:
About these definitions, which of the following statements is TRUE?
A
Liquidity risk is inaccurate, but the other three are correct
B
Funding cost risk is inaccurate, but the other three are correct
C
Cash risk at Risk (CFaR) is inaccurate, but the other three are correct
D
All four definitions are correct