On the Evaluation of LVaR During the Closeout Liquidity Horizon

Abstract

In this paper, we launch a practical modus-operandi for the assessment of potential market risk exposures for financial trading portfolios by providing an investment management perspective from the 2007-2009 global financial crisis. This proposed tactic is based on the renowned concept of Liquidity-Adjusted Value-at-Risk (LVaR) along with the innovation of a risk-engine algorithm that can estimate LVaR for both long and short-sales positions.

Keywords: emerging markets, financial engineering, financial risk management, GARCH, GCC financial markets, investment management, LVaR, liquidity-adjusted value-at-risk portfolio management, stress testing.

JEL Classification: C10, C13, G20, and G28