AI Case Study

Danske Bank plans to determine liquidity risk using Bloomberg's machine learning product LQA

Danske Bank announced it would use Bloomberg's machine learning LQA product to assist in determining its liquidity risk as part of regulatory compliance efforts.

Industry

Financial Services

Banking

Project Overview

"Bloomberg LQA provides a standard methodology for calculating liquidity risk across asset classes. It helps firms adopt a systematic approach to measuring and reporting liquidity risk and gives professionals across the organization access to consistent risk data."

"LQA provides risk managers, portfolio managers, traders, and compliance officers with a standard definition of liquidity and a consistent approach to measuring the expected cost of liquidation for a specific volume of securities, and a desired time horizon. It also provides a score designed to indicate security-level liquidity with respect to liquidation cost and its distributions across different volumes."

Reported Results

Planned; results not yet available

Technology

"Bloomberg LQA uses machine learning techniques, such as cluster analysis, to dynamically identify and leverage transaction data for comparable securities. The application of machine learning enables Bloomberg LQA to transcend the inherent limitations of the widely used bid/ask approach to measure liquidity risk, which can overlook important variables. By leveraging a larger set of factors, Bloomberg LQA can better assess liquidity across instruments and across time."

Function

Finance

Treasury Management

Background

"Danske Bank Asset Management is a Copenhagen-based international asset manager with more than €100bn in assets under management. It provides investment services in dedicated sectors where it has the knowledge, resources and capability to generate alpha for institutional clients around the world. The company uses Bloomberg LQA to measure and benchmark the liquidity risk of its fixed income and equity portfolio investments to adhere to current and pending regulatory reporting requirements. Regulatory mandates issued under UCITS and AIFMD require fund managers domiciled in the EU, or that manage funds within the EU, to evaluate and report the liquidity risk of portfolio holdings on a regular basis."

Benefits

Data

"Bloomberg LQA provides coverage for government, agency, corporate and municipal bond securities as well as global equities and ETFs."