CEIOPS Task Force Report on the Liquidity Premium - Eiopa
CEIOPS Task Force Report on the Liquidity Premium - Eiopa
CEIOPS Task Force Report on the Liquidity Premium - Eiopa
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ANNEX B – ALTERNATIVE METHOD OF APPLICATION OF A LIQUIDITY<br />
PREMIUM TO LIABILITIES<br />
A more sophisticated alternative to <strong>the</strong> bucket approach described in chapter I-6 has<br />
been presented by CRO/CFO where <strong>the</strong> formula <strong>on</strong> page 16 is replaced as follows:<br />
LPliab, T, curr, I = F (T, curr)* G(T) * LPassets<br />
where <strong>the</strong> functi<strong>on</strong> F is defined as in chapter I-6, but <strong>the</strong> value of functi<strong>on</strong> G depends<br />
<strong>on</strong> <strong>the</strong> degree of predictability of a cash flow for a certain product at maturity T ra<strong>the</strong>r<br />
than <strong>on</strong> a bucket this product would bel<strong>on</strong>g to.<br />
For a given maturity this approach requires <strong>the</strong> calculati<strong>on</strong> of not <strong>on</strong>ly <strong>the</strong> best<br />
estimate of a cash flow, but equally of its distributi<strong>on</strong>.<br />
32/33<br />
© <str<strong>on</strong>g>CEIOPS</str<strong>on</strong>g> 2010
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