14.2 Cumulative Gaps
Cumulative Gap is the net gap from today up to a given time horizon or time bucket in future. It is calculated as the sum of liquidity gaps from the first time bucket up to each future time bucket. Cumulative gap can be positive or negative, depending on whether cumulative inflows are greater than the cumulative outflows and vice versa.
Cumulative gap is computed as follows:
Where,
T: Each time bucket
N: Total number of time buckets
Cumulative gap is computed under contractual terms, business-as-usual conditions and stress scenarios.
In the below example, Numerical Example (in $).
Table 13-1 Cumulative Gap Example
Time Bucket | 1-14 Days | 15-28 Days | 29 Days – 3 Months | 3-6 Months |
---|---|---|---|---|
Inflows | 500 | 300 | 1000 | 2000 |
Outflows | 200 | 500 | 1250 | 1500 |
Liquidity Gap |
300 [=500-200] |
-200 [=300-500] |
-250 [=1000-1250] |
500 [=2000-1500] |
Cumulative Gap | 300 |
100 [=300+(-200)] |
-150 [=100+(-250)] |
350 [=-150+500] |
Note:
This calculation occurs at the reporting layer.