Measuring and managing liquidity risk in the Hungarian practice

Balázs Árpád Szűcs and Kata Váradi

Society and Economy, 2014, vol. 36, issue 4, 543-563

Abstract: The crisis that unfolded in 2007/2008 turned the attention of the financial world toward liquidity, the lack of which caused substantial losses. As a result, the need arose for the traditional financial models to be extended with liquidity. Our goal is to discover how Hungarian market players relate to liquidity. Our results are obtained through a series of semi-structured interviews, and are hoped to be a starting point for extending the existing models in an appropriate way. Our main results show that different investor groups can be identified along their approaches to liquidity, and they rarely use sophisticated models to measure and manage liquidity. We conclude that although market players would have access to complex liquidity measurement and management tools, there is a limited need for these, because the currently available models are unable to use complex liquidity information effectively.

Keywords: market liquidity; portfolio optimization; semi-structured interview (search for similar items in EconPapers)
JEL-codes: G11 G32 (search for similar items in EconPapers)
Date: 2014
Note: Acknowledgement: The authors thank the Budapest Stock Exchange and MSCI for their support. The interview series was supported by the Budapest Stock Exchange, the subsequent research was supported by MSCI. The authors also thank the interviewees for their cooperation. Finally, the authors thank Edina Berlinger, Ákos Gyarmati, Márton Michaletzky and Gábor Völgyes for assistance in conducting the interviews.
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Working Paper: Measuring and managing liquidity risk in the Hungarian practice (2015)
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