Examining liquidity risk and calculating value at risk of portfolio taking into account the liquidity aspect of equities


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2016 (EN)
Examining liquidity risk and calculating value at risk of portfolio taking into account the liquidity aspect of equities (EN)

Gogoglou, Efstratios (EN)

School of Economics, Business Administration and Legal Studies, Executive MBA (EL)
Karyampas, Dimitris (EN)
Leventis, Stergios (EN)
Grose, Christos (EN)

This dissertation w as written as part of the EMBA at the International Hellenic University. The recent crisis has high - light ed the importance of liquidity for the correct functioning of financial markets and the banking sector. Many financial institutions faced problems because they did not manage their liquidity more circumspectly . They depended too much on short - term sources of funding and on funding from other institutions and at the same time they did not hold sufficient stocks of liquid assets to be in a position to handle a deterioration in funding conditions. The crisis in liquidity in many funding markets in 2007 - 08 demonstrated how quickly liquidity can disappear and proved that the institutions have to change their approach on managing liquidity risk. Having experienced these events , the global financial system is entering a new era in which liquidity will be a key element. During the last few years, value at risk has become a favored tool for measuring market risk across financial institutions. However, the classical VaR modeling ignores the presence of a liquidity component. This component arises from the hypothesis that the theoretical selling off implied by the VaR calculations takes place at the mid-price. The main goal of this dissertation is investigate the aspect of the liquidity of a portfolio of assets and more specifically of stocks. In the first part we present liquidity and associated risk along with the main measures of liquidity. In the second part we introduce the Value at Risk concept of a portfolio and how to incorporate liquidity in its calculation. Differe nt models are presented. The third part is the empirical analysis. The collected time series data were used to calculate VaR and LVaR with different methods and for different portfolios to illustrate how liquidity can increase the calculated value at risk of a portfolio . (EN)


Financial institutions (EN)

Διεθνές Πανεπιστήμιο της Ελλάδος (EL)
International Hellenic University (EN)



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