Author(s): Bor Bricelj | Sebastjan Strašek | Timotej Jagric
Journal: Management
ISSN 1854-4223
Volume: 8;
Issue: 3;
Start page: 183;
Date: 2013;
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Keywords: value-at-risk | liquidity | backtests
ABSTRACT
In this article we implement liquidity in the standard value-at-riskframework. We incorporate bid-ask spread into basic VaR models. Wethen test these models on three foreign markets and on a domesticone. We conclude that liquidity VaR models adequately measure marketrisk. On one hand, the liquidity VaR methodology represents advancementin market risk analysis, but on the other hand, those modelsare not yet robust enough to pass all backtests. Comparing the resultsbetween markets we conclude that the results for the domesticmarket are comparable to those of foreign ones despite their size difference.
Journal: Management
ISSN 1854-4223
Volume: 8;
Issue: 3;
Start page: 183;
Date: 2013;
VIEW PDF
DOWNLOAD PDF Original pageKeywords: value-at-risk | liquidity | backtests
ABSTRACT
In this article we implement liquidity in the standard value-at-riskframework. We incorporate bid-ask spread into basic VaR models. Wethen test these models on three foreign markets and on a domesticone. We conclude that liquidity VaR models adequately measure marketrisk. On one hand, the liquidity VaR methodology represents advancementin market risk analysis, but on the other hand, those modelsare not yet robust enough to pass all backtests. Comparing the resultsbetween markets we conclude that the results for the domesticmarket are comparable to those of foreign ones despite their size difference.
