publication . Article . 2016

Risk Management for Whales

Cont, Rama; Wagalath, Lakshithe;
Open Access
  • Published: 01 Jun 2016
  • Publisher: Risk Magazine Limited
Abstract
International audience; We propose framework for modeling portfolio risk which integrates market risk with liquidation costs which may arise in stress scenarios. Our model provides a systematic method for computing liquidation-adjusted risk measures for a portfolio. Calculation of Liquidation-adjusted VaR (LVaR) for sample portfolios reveals a substantial impact of liquidation costs on portfolio risk for portfolios with large concentrated positions.
Subjects
free text keywords: liquidity, risk management, [MATH.MATH-PR]Mathematics [math]/Probability [math.PR]
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