Market liquidity risk and market risk measurement

Title

Market liquidity risk and market risk measurement

 Author

Tian, Y.

Contributor

Oosterlee, C.W. (mentor)

Faculty

Electrical Engineering, Mathematics and Computer Science

 Department

Applied mathematics

 Date

2009-07-10

 Abstract

The main aim of the thesis is to formulate a concept of liquidity risk and to incorporate liquidity risk in market risk measurement. We first review two types of liquidity risk and the relation between liquidity risk and market risk. To achieve our aim, we use a new framework of portfolio theory introduced by Acerbi. A novelty of Acerbi’s framework is that portfolio valuation includes a consideration of liquidity risk in portfolio valuation. Under the new framework, the valuation of a portfolio becomes a convex optimization problem. We give some examples of calculation schemes for the convex optimization problem. Equipped with the new portfolio theory, we can quantify market liquidity risk and introduce a new market risk measure which includes the impact of liquidity risk. We end the thesis by giving some possible questions for further study.

 Subject

market liquidity risk
MSDC
portfolio value
market risk measurement

 To reference this document use:

http://resolver.tudelft.nl/uuid:e9431f59-9ce3-4fb2-a0d7-26665dec68ce

 Embargo date

2009-07-10

 Part of collection

Student theses

 Document type

master thesis

 Rights

(c) 2009 Tian, Y.
Files
PDF Yus_thesis-June_18.pdf 1.43 MB
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