How large is liquidity risk in an automated auction market?

Pierre Giot and Joachim Grammig ()

University of St. Gallen Department of Economics working paper series 2002 from Department of Economics, University of St. Gallen

Abstract: We introduce a new empirical methodology that takes account of liquidity risk in a Value-at-Risk framework, and quantify liquidity risk premiums for portfolios and individual stocks traded on the automated auction market Xetra which operates at various European exchanges. When constructing liquidity risk measures we allow for the potential price impact incurred by the liquidation of a portfolio. We study the sensitivity of liquidity risk towards portfolio size and VaR time horizon, and interpret its diurnal variation in the light of market microstructure theory.

Keywords: Liquidity; Value-at-Risk; Microstructure (search for similar items in EconPapers)
JEL-codes: G10 G14 G15 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2002-10
New Economics Papers: this item is included in nep-fin, nep-fmk and nep-rmg
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://ux-tauri.unisg.ch/RePEc/usg/dp2002/dp0223grammig_ganz.pdf (application/pdf)

Related works:
Journal Article: How large is liquidity risk in an automated auction market? (2006)
Working Paper: How large is liquidity risk in an automated auction market? (2006)
Working Paper: How large is liquidity risk in an automated auction market ? (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:usg:dp2002:2002-23

Access Statistics for this paper

More papers in University of St. Gallen Department of Economics working paper series 2002 from Department of Economics, University of St. Gallen Contact information at EDIRC.
Bibliographic data for series maintained by Joerg Baumberger ( this e-mail address is bad, please contact ).