Emerging Practices for Capital Adequacy © Copyright 2003, CCRO. All rights reserved. 54 8.5 Measuring Liquidity Uses The sum of fixed payments and contingent liquidity is also referred to as liquidity uses. These represent the potential demands or cash flow obligations of a firm. Figure 20 and subsequent descriptions illustrate a framework for calculating uses of liquidity. Figure 20: Framework for Calculating Uses of Liquidity 8.6 Trigger Events and Other Contingent Events Trigger events are defined as material adverse changes and debt-equity changes and are usually contractual, whereas contingent events are events that create contingent liquidity requirements on liquidity. Examples of these types of events are: Trigger events: • Downgrade event – Loss of threshold – Adequate assurance • Debt/equity trigger Contingency events: • Operational/operations risk • Credit/counterparty termination default Contract Rules • Threshold • Collateral • Netting Forecast Settlem ents on Assets Cash Flow at Risk Fixed Paym ents Liquidity Uses Contingent Liquidity Trigger Events • Downgrade • Debt/equity trigger • Adequate assurance • Credit • Operational/ Operations Market Risk MTM VaR Distribution Price Propagation Process