Advanced Search
MyIDEAS: Login to save this paper or follow this series

Asset Allocation with Liquidity-Adjusted Market Risk Modeling: Empirical Relevance to Emerging GCC Financial Markets


Author Info

  • Mazin A. M. Al Janabi

    (Department of Economics and Finance, College of Business and Economics United Arab Emirates University)

Registered author(s):


    The aim of this article is to bridge the gap in equity trading risk management literatures and particularly from the perspective of emerging and illiquid markets, such as in the context of the Gulf Cooperation Council (GCC)’s six financial markets. To the authors’ best knowledge, this is the first research paper that addresses the issue of equity trading risk management in the GCC countries with direct applications to their six stock markets. In this paper, the authors demonstrate a practical approach for measurement, management and control of market and liquidity risk exposures for financial trading portfolios that contain several illiquid equity securities. This approach is based on the renowned concept of Liquidity-Adjusted Value at Risk (L-VaR) along with the development of an optimization software tool utilizing matrix-algebra technique under the notion of different correlation factors and liquidation horizons. The comprehensive trading risk model can simultaneously handle L-VaR analysis under normal and severe market conditions besides it takes into account the effects of illiquidity of all traded equity securities. In order to illustrate the proper use of L-VaR and stress-testing methods, real-world examples and feasible reports of equity trading risk management are presented for the six GCC equity financial markets by implementing a daily database of indices’ returns for the period 2004-2008. To this end, several financial modeling studies are achieved with the objective of creating a realistic framework of equity trading risk measurement and control reports in addition to the instigation of a practical iterative optimization technique for the calculation of maximum authorized L-VaR limits subject to real-world optimum operational constraints.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL:
    Our checks indicate that this address may not be valid because: 500 Can't connect to (10060). If this is indeed the case, please notify (Namees Nabeel)
    Download Restriction: no

    File URL:
    Our checks indicate that this address may not be valid because: 500 Can't connect to (10060). If this is indeed the case, please notify (Namees Nabeel)
    Download Restriction: no

    Bibliographic Info

    Paper provided by Economic Research Forum in its series Working Papers with number 464.

    as in new window
    Length: 31 pages
    Date of creation: Feb 2009
    Date of revision: Feb 2009
    Publication status: Published by The Economic Research Forum (ERF)
    Handle: RePEc:erg:wpaper:464

    Contact details of provider:
    Postal: 7 Boulos Hanna Street, Dokki, Cairo
    Phone: 202-3370810
    Fax: 202-3616042
    Web page:
    More information through EDIRC

    Related research



    No references listed on IDEAS
    You can help add them by filling out this form.



    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


    Access and download statistics


    When requesting a correction, please mention this item's handle: RePEc:erg:wpaper:464. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Namees Nabeel).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.