Method Development Aspects of Liquidity-Adjusted Value-at-Risk (LVaR) Technique for Multiple-Asset Commodities Portfolios

Abstract

This paper reviews and examines the method development aspects of Al Janabi (2012) theoretical foundations and optimization algorithms for the assessment of Liquidity-Adjusted Value at Risk (LVaR) technique under adverse market conditions. This paper focuses on the development of robust theoretical foundation and modeling framework that attempt to tackle the issue of market/liquidity risk and economic-capital estimation at a portfolio level and within a multivariate context.

Keywords: Emerging Markets, Financial Engineering, Financial Risk Management, GARCH-M Model, GCC Financial Markets, Liquidity Risk, Optimization, Portfolio Management, Sub-prime Crisis, Value-at-Risk

JEL Classification: C10, C13, G20, and G28