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dc.contributor.authorStange, Sebastianen_US
dc.contributor.authorKaserer, Christophen_US
dc.date.accessioned2011-07-18T08:59:48Z-
dc.date.available2011-07-18T08:59:48Z-
dc.date.issued2008en_US
dc.identifier.urihttp://hdl.handle.net/10419/48441-
dc.description.abstractWe integrate liquidity risk measured by the weighted spread into a Value-at-Risk (VaR) framework. The weighted spread measure extracts liquidity costs by order size from the limit order book. We show that it is precise from a risk perspective in a wide range of clearly defined situations. Using a unique, representative data set provided by Deutsche Boerse AG, we find liquidity risk to increase traditionally-measured price risk by over 25%, even at standard 10-day horizons and for liquid DAX stocks. We also show that the common approach of simply adding liquidity risk to price risk substantially overestimates total risk because correlation between liquidity and price is neglected. Our results are robust with respect to changes in risk measure, to sample periods and to effects of portfolio diversification.en_US
dc.language.isoengen_US
dc.publisherCenter for Entrepreneurial and Financial Studies (CEFS) Munichen_US
dc.relation.ispartofseriesCEFS working paper series 2008-10en_US
dc.subject.jelG11en_US
dc.subject.jelG12en_US
dc.subject.jelG18en_US
dc.subject.jelG32en_US
dc.subject.ddc330en_US
dc.subject.keywordasset liquidityen_US
dc.subject.keywordprice impacten_US
dc.subject.keywordweighted spreaden_US
dc.subject.keywordXetra Liquidity Measure (XLM)en_US
dc.subject.keywordValue-at-Risken_US
dc.subject.keywordmarket liquidity risken_US
dc.subject.stwWertpapierhandelen_US
dc.subject.stwBörsenkursen_US
dc.subject.stwRisikomaßen_US
dc.subject.stwMarktrisikoen_US
dc.titleWhy and how to integrate liquidity risk into a VaR-frameworken_US
dc.typeWorking Paperen_US
dc.identifier.ppn587947276en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
dc.identifier.repecRePEc:zbw:cefswp:200810-
Appears in Collections:CEFS Working Paper Series, Center for Entrepreneurial and Financial Studies, Technische Universität München

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