Abstract
The 2008–2009 Global Financial Crisis (GFC 2008/9) was a reminder that the majority of commercial banks then lacked adequate liquid assets to survive liquidity risk linked to times of financial pleasure. Hence, in December 2010, the Basel Committee of Banking Supervision (BCBS) announced a pair of novel ratios, the “Liquidity Coverage Ratio” (LCR) and the “Net Stable Funding Ratio” (NSFR) to make sure banks would be adequately supported with “High Quality Liquid Assets” (HQLA) when faced with financial pressure. Gold, on the other hand, to date has not been included as HQLA stock due to high volatility. This paper provides empirical evidence employing GARCH family models to show that Gold has similar symmetric volatility structure as other traditional assets, namely stocks indices, bonds and dollar index in the United State financial market, but, its price volatility is not affected by asymmetric market information (absence of leverage effect) compared with these assets. Thus, gold has a reserved relevance in the financial market for analysing portfolios and managing risks, especially when there is a period of financial distress as it is empowered with the role of hedge or safe-haven and diversification to minimize the risks, which recommended its inclusion in HQLA stock.
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Bayram, K., Othman, A.H.A. (2022). The Suitability of Gold as a High-Quality Liquid Asset: Empirical Evidence from Volatility Structure Analysis. In: Hamdan, A., Harraf, A., Arora, P., Alareeni, B., Khamis Hamdan, R. (eds) Future of Organizations and Work After the 4th Industrial Revolution. Studies in Computational Intelligence, vol 1037. Springer, Cham. https://doi.org/10.1007/978-3-030-99000-8_7
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