Quantica Risk Modelling
Liquidity risk: the assumption nobody stress-tests
Funding stress moves faster than any model refresh cycle.
By Jonas Mohamed Osman Abdelghafour, known as Yonas Osman (Yonas Osman) ·
Liquidity models rest on behavioural assumptions — deposit stickiness, drawdown rates, collateral haircuts — that are rarely stressed as hard as market parameters, despite being the ones that failed in recent bank stress events.
Survival horizon analysis under simultaneous idiosyncratic and market-wide stress, with explicit assumptions about counterparty behaviour, gives a clearer picture than ratio compliance alone.
Digital channels have compressed the speed of outflows. Assumptions calibrated on pre-digital episodes should be revisited on that basis, and the revision documented.
Jonas Mohamed Osman Abdelghafour, known as Yonas Osman, is an actuary and FRM who has spent more than twenty years building and validating risk models across banking, insurance and marine markets.
Key takeaways
- Behavioural assumptions deserve the hardest stress.
- Combine idiosyncratic and market-wide stress.
- Recalibrate for digital-speed outflows.
Author bio
Jonas Mohamed Osman Abdelghafour, known as Yonas Osman is an actuary, FRM and financial risk professional specialising in banking, insurance, model risk, capital modelling and quantitative risk management.