IDEAS home Printed from https://ideas.repec.org/a/ris/jofitr/1534.html
   My bibliography  Save this article

Measuring market liquidity risk - which model works best?

Author

Listed:

Abstract

Market liquidity risk, the difficulty or cost of trading assets in crises, has been recognized as an important factor in risk management. The literature has already proposed several models to include liquidity risk in the standard Value-at-Risk framework. While theoretical comparisons between those models have been conducted, their empirical performance has yet to be benchmarked. This paper performs comparative back-testings of daily risk forecasts for a large selection of liquidity risk models. In a comprehensive 5.5-year stock sample we show which model provides the most accurate results and provide detailed recommendations about which model is most suitable in a specific situation.

Suggested Citation

  • Ernst, Cornelia & Stange, Sebastian & Kaserer, Christoph, 2012. "Measuring market liquidity risk - which model works best?," Journal of Financial Transformation, Capco Institute, vol. 35, pages 133-146.
  • Handle: RePEc:ris:jofitr:1534
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bervas, A., 2006. "Market liquidity and its incorporation into risk management," Financial Stability Review, Banque de France, issue 8, pages 63-79, May.
    2. Anil Bangia & Francis X. Diebold & Til Schuermann & John D. Stroughair, 1998. "Modeling Liquidity Risk With Implications for Traditional Market Risk Measurement and Management," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-062, New York University, Leonard N. Stern School of Business-.
    3. Umut Çetin & Robert A. Jarrow & Philip Protter, 2008. "Liquidity risk and arbitrage pricing theory," World Scientific Book Chapters,in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 8, pages 153-183 World Scientific Publishing Co. Pte. Ltd..
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Becchetti, L. & Ferrari, M. & Trenta, U., 2014. "The impact of the French Tobin tax," Journal of Financial Stability, Elsevier, vol. 15(C), pages 127-148.
    2. Holmberg, Ulf, 2012. "Essays on Credit Markets and Banking," Umeå Economic Studies 840, Umeå University, Department of Economics.
    3. repec:wsi:ijfexx:v:02:y:2015:i:03:n:s2424786315500334 is not listed on IDEAS
    4. Strašek Sebastjan & Bricelj Bor, 2016. "Spread and Liquidity Issues: A markets comparison," Naše gospodarstvo/Our economy, De Gruyter Open, vol. 62(1), pages 3-11, March.

    More about this item

    Keywords

    market liquidity; market liquidity risk; risk management; liquidity risk; Value-at-Risk; liquidity risk model;

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:jofitr:1534. 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: (Prof. Shahin Shojai). General contact details of provider: http://www.capco.com/ .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.