Academic Journals Database
Disseminating quality controlled scientific knowledge

The Influence of Liquidity Risk on Value-at-Risk Calculations

Author(s): Bor Bricelj | Sebastjan Strašek | Timotej Jagric

Journal: Management
ISSN 1854-4223

Volume: 8;
Issue: 3;
Start page: 183;
Date: 2013;
VIEW PDF   PDF DOWNLOAD PDF   Download PDF Original page

Keywords: value-at-risk | liquidity | backtests

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.

Tango Jona
Tangokurs Rapperswil-Jona

RPA Switzerland

Robotic Process Automation Switzerland