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Conference papers Year : 2012

MLiq a meta liquidity measure

Abstract

The last crisis sheds light on the importance to consider liquidity risk in the financial industry. Indeed, liquidity had a predominant role in propagating the turmoil. In contrast, controlling for liquidity is a difficult task. The definition of liquidity links different dimensions that are impossible to fully capture together. As a consequence, there exist a lot of liquidity measures and we find in the literature some solutions to take into account more than one dimension of liquidity but also liquidity measures considering a long lasting liquidity problem. In this paper, we focus on drastic illiquidity events, i.e liquidity problems reported by several liquidity measures simultaneously. We propose a Meta-Measure of liquidity called MLiq and defined as the probability to be in a state of high liquidity risk. We use a multivariate model allowing to measure correlations between liquidity measures jointly with a state-space model that endogenously defines the illiquid periods.
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Dates and versions

halshs-00877026, version 1 (25-10-2013)

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  • HAL Id : halshs-00877026 , version 1

Cite

Serge Darolles, Jérémy Dudek, Gaëlle Le Fol. MLiq a meta liquidity measure. Computational and Financial Econometrics (CFE'12), Dec 2012, Oviedo, Spain. ⟨halshs-00877026⟩
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Last update date on 5/18/24
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