This chapter derives variables that have to be considered by a bank liquidity model. In a preparatory step, we introduce fundamental concepts and tools that are used in subsequent sections. Variables are derived from liquidity strategies run by banks. The variables are stochastic processes. Together, they form the liquidity framework. The framework is not a liquidity model but rather describes a family of models. A model is obtained by specifying the process dynamics. The framework serves as input for the next chapter where our liquidity model is presented.
KeywordsInterest Rate Cash Flow European Central Bank Credit Spread Liquidity Risk
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