Managing assets involves understanding the risks associated with non-liquid assets, leveraging auctions and liquidation sales, and measuring the efficiency of asset conversion. This article explores the challenges of holding non-liquid assets, the impact of payment terms on cash flow, strategies to protect liquidity against external risks like bank failures, and metrics for evaluating asset conversion efficiency.

Regulatory requirements play a crucial role in shaping counterparty risk management practices. These requirements mandate stringent risk management frameworks, compliance with standards like Basel III, and enhanced client due diligence. This article delves into the impact of regulatory demands, the essential elements of a robust backtesting methodology, strategies for improving risk assessment, and the benefits and challenges of automating counterparty risk management.

As the landscape of credit risk management evolves, staying ahead of future trends is crucial for validating credit risk models effectively. The integration of machine learning and artificial intelligence is transforming how predictive power and efficiency are harnessed, yet these advancements come with new challenges in interpretability and regulatory compliance.

In response to the 2008 financial crisis, Basel III liquidity standards were introduced to ensure banks have sufficient capital and liquidity to withstand periods of financial stress. These standards, including higher equity ratios and liquidity requirements like the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR), aim to create a more resilient global banking system.