34. Hedge impact (LCR, Basel III)

Definition

A bank is permitted to hedge the market risk associated with ownership of the stock of HQLA and still include the assets in the stock. If it chooses to hedge the market risk, the bank should take into account (in the market value applied to each asset) the cash outflow that would arise if the hedge were to be closed out early (in the event of the asset being sold).

Related terms:

Parent term:

(2) Operational requirements (LCR, Basel III)

Sibling terms:

28. Purpose of the operational requirements (LCR, Basel III)
29. Manifestation of the liquidity (LCR, Basel III)
30. Regular asset monetisation (LCR, Basel III)
31. Unencumbered characteristics of the assets (LCR, Basel III)
32. Influence of operational capability to monetise (LCR, Basel III)
33. Demonstrability of the stock control (LCR, Basel III)
35. HQLA management (LCR, Basel III)
36. Consolidation of the assets (LCR, Basel III)
37. Impediments to the asset transfer (LCR, Basel III)
38. Asset classes traded in the market of limited size (LCR, Basel III)
39. Rehypothecated assets (LCR, Basel III)
40. Derivatives transaction collateral (LCR, Basel III)
41. Intraday liquidity management (LCR, Basel III)
42. Currency localisation and currency exchange risks (LCR, Basel III)
43. Mitigation period for the asset replacement (LCR, Basel III)