Market Risk Prediction under Illiquid Market Environments: A Comparison of Alternative Modeling Techniques

7 Pages Posted: 19 May 2021 Last revised: 20 May 2021

See all articles by Mazin A. M. Al Janabi

Mazin A. M. Al Janabi

EGADE Business School, Tecnologico de Monterrey; EGADE Business School, Tecnologico de Monterrey; Economic Research Forum (ERF)

Date Written: May 18, 2021

Abstract

This paper bridges the gap in trading risk management literatures, and particularly from the perspective of emerging and illiquid markets. We find that under certain trading strategies, such as short-selling of stocks, the sensitivity of L-VaR statistics are rather critical to the selected internal asset liquidity model in addition to the degree of correlation factors among trading assets.

Keywords: Economic Capital, Emerging Markets, Financial Engineering, Financial Risk Management, GARCH-M, Portfolio Management, Stress Testing, Liquidity-Adjusted Value at Risk

JEL Classification: C10, C13, G20, and G28

Suggested Citation

Al Janabi, Mazin A. M., Market Risk Prediction under Illiquid Market Environments: A Comparison of Alternative Modeling Techniques (May 18, 2021). Available at SSRN: https://ssrn.com/abstract=3847066 or http://dx.doi.org/10.2139/ssrn.3847066

Mazin A. M. Al Janabi (Contact Author)

EGADE Business School, Tecnologico de Monterrey ( email )

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EGADE Business School, Tecnologico de Monterrey ( email )

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