On the Assessment of Coherent Risk-Capital Structures

7 Pages Posted: 18 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 16, 2021

Abstract

We argue that asset liquidity risk associated with the uncertainty of liquidating multiple-assets over a given holding period, particularly for thinly traded or emerging markets securities under adverse market conditions, is a key factor in formalizing and measuring overall trading risk and is therefore an important component to model. This paper proposes a practical framework for the quantification of asset liquidity risk, and its impact on economic capital allocations, for multiple assets’ portfolios.

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

JEL Classification: C10, C13, G20, and G28

Suggested Citation

Al Janabi, Mazin A. M., On the Assessment of Coherent Risk-Capital Structures (May 16, 2021). Available at SSRN: https://ssrn.com/abstract=3847071 or http://dx.doi.org/10.2139/ssrn.3847071

Mazin A. M. Al Janabi (Contact Author)

EGADE Business School, Tecnologico de Monterrey ( email )

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Mexico

EGADE Business School, Tecnologico de Monterrey ( email )

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Economic Research Forum (ERF) ( email )

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