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Q.4204 Given that a six-year amortizing loan in recent times has the following annual liquidity premiums: 6, 14, 18, 24, 27, 32. Use the matched-maturity marginal cost of funds approach to calculate the charge of funding liquidity risk of this loan. | Financial Risk Manager Part 2 Quiz - LeetQuiz

Explanation:

\frac{(\text{Term in year 1} \times \text{Term liquidity premium}) + (\text{Term in year 2} \times \text{Term liquidity premium}) + \cdots + (\text{Term in year n} \times \text{Term liquidity premium})}{\text{Term in year } (1 + 2 + 3 + \ldots + n)}

Thus, the charge of funding liquidity risk of this loan is

\frac{(1 \times 6) + (2 \times 14) + (3 \times 18) + (4 \times 24) + (5 \times 27) + (6 \times 32)}{(1 + 2 + 3 + 4 + 5 + 6)} = 24.33\text{ bps}

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Q.4204 Given that a six-year amortizing loan in recent times has the following annual liquidity premiums: 6, 14, 18, 24, 27, 32. Use the matched-maturity marginal cost of funds approach to calculate the charge of funding liquidity risk of this loan.

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