A LIQUIDATION RISK ADJUSTMENT FOR VALUE ...
Type de document :
Compte-rendu et recension critique d'ouvrage
Titre :
A LIQUIDATION RISK ADJUSTMENT FOR VALUE AT RISK AND EXPECTED SHORTFALL
Auteur(s) :
Wagalath, Lakshithe [Auteur]
Lille économie management - UMR 9221 [LEM]
Zubelli, Jorge [Auteur]
Instituto Nacional de Matemática Pura e Aplicada [IMPA]
Lille économie management - UMR 9221 [LEM]
Zubelli, Jorge [Auteur]
Instituto Nacional de Matemática Pura e Aplicada [IMPA]
Titre de la revue :
International Journal of Theoretical and Applied Finance
Pagination :
1850010
Éditeur :
World Scientific Publishing
Date de publication :
2018-06-03
ISSN :
0219-0249
Mot(s)-clé(s) en anglais :
Liquidation risk
fire sales
value at risk
expected shortfall
risk management
price impact
fire sales
value at risk
expected shortfall
risk management
price impact
Discipline(s) HAL :
Sciences de l'Homme et Société/Gestion et management
Résumé en anglais : [en]
This paper proposes an intuitive and flexible framework to quantify liquidation risk for financial institutions. We develop a model where the “fundamental” dynamics of assets is modified by price impacts from fund liquidations. ...
Lire la suite >This paper proposes an intuitive and flexible framework to quantify liquidation risk for financial institutions. We develop a model where the “fundamental” dynamics of assets is modified by price impacts from fund liquidations. We characterize mathematically the liquidation schedule of financial institutions and study in detail the fire sales resulting endogenously from margin constraints when a financial institution trades through an exchange. Our study enables to obtain tractable formulas for the value at risk and expected shortfall of a financial institution in the presence of fund liquidation. In particular, we find an additive decomposition for liquidation-adjusted risk measures. We show that such a measure can be expressed as a “fundamental” risk measure plus a liquidation risk adjustment that is proportional to the size of fund positions as a fraction of asset market depths. Our results can be used by risk managers in financial institutions to tackle liquidity events arising from fund liquidations better and adjust their portfolio allocations to liquidation risk more accurately.Lire moins >
Lire la suite >This paper proposes an intuitive and flexible framework to quantify liquidation risk for financial institutions. We develop a model where the “fundamental” dynamics of assets is modified by price impacts from fund liquidations. We characterize mathematically the liquidation schedule of financial institutions and study in detail the fire sales resulting endogenously from margin constraints when a financial institution trades through an exchange. Our study enables to obtain tractable formulas for the value at risk and expected shortfall of a financial institution in the presence of fund liquidation. In particular, we find an additive decomposition for liquidation-adjusted risk measures. We show that such a measure can be expressed as a “fundamental” risk measure plus a liquidation risk adjustment that is proportional to the size of fund positions as a fraction of asset market depths. Our results can be used by risk managers in financial institutions to tackle liquidity events arising from fund liquidations better and adjust their portfolio allocations to liquidation risk more accurately.Lire moins >
Langue :
Anglais
Vulgarisation :
Non
Collections :
Source :