FRM Handbook Ch 26: Liquidity Risk
Book: Financial Risk Manager Handbook Plus Test Bank
Author: Philippe Jorion
ISBN: 978-0-470-90401-5
You can be solvent on paper and still die in a week. That is the core lesson of Chapter 26. Liquidity risk does not show up in a standard VaR number. It shows up when counterparties refuse to roll funding, when depositors line up at the door, and when the only way to raise cash is to sell assets into a market that has stopped buying.