Acta academica karviniensia 2012, 12(3):102-113 | DOI: 10.25142/aak.2012.044

ZAKOMPONOVÁNÍ RIZIKA LIKVIDITY DO MODELU VALUE AT RISK

Michal Polák

Ing. Michal Polák, Externí doktorand, Katedra bankovnictví a pojišťovnictví, Fakulta financí a účetnictví, Vysoká škola ekonomická v Praze, Nám. W. Churchilla 4, 130 68 Praha - Žižkov, xpolm50@vse.cz

The main aim of the article is to point out ways of integrating liquidity risk into basic VaR model. Liquidity risk in the VaR model is incorporated through the cost of disposal in the form of a bid - ask spread. The main idea of the approach incorporating exogenous liquidity risk in the model is to add maximal possible changes of the market range to maximum possible loss of assets price (mid price) for a certain degree of probability. Changes in the market range is understood as an independent random variable, which is defined by the mean and variance and probability distribution. The models are often considered only the normal distribution, which can distort the Vaule at risk, especially in markets with illiquid assets. An important factor in the liquidity risk is the time factor, which is understood as liquidity risk due to the variability of the market range over the liquidation of assets.From those methods of quantification, is known, that, the longer time of liquidation asset, the higher is VaR.

Keywords: Liquidity Adjusted Value-at-Risk, Bid-Ask Spread, Liquidity cost, Costs, Price Impact

JEL classification: E42

Published: September 30, 2012  Show citation