流动性风险68212575.pptVIP

Example 1 Suppose that a financial institution has bought 10 million shares of one company and 50 million ounces of a commodity.The shares are bid $89.5,offer$90.5. The commodity is bid $15, offer $15.1. The cost of liquidation in a normal market is ? The mid-market value of the position in the share is 90×10=900 million; in the commodity is 15.05×50=752.50million the bid-offer spread for share is 1/90= 0.01111 for commodity is 0.1/15.05=0.006645 cost of liquidation 900×0.01111×1/2+752.5×0.006645×1/2=7.5million Example 2 Suppose that in Example 1 the mean and standard deviation for the proportional bid-offer spread for the shares are0.01111 and 0.02222; for the commodity are both 0.006645. Assuming that the spreads are normally distributed, the cost of liquidation that we are 99% confident,thatλ=2.33 900×1/2(0.01111+2.33×0.02222)+752.5×(0.006645+2.33×0.006645)=73.25 Risk Management and Financial Institutions 2e, Chapter 19, Copyright ? John C. Hull 2009 Liquidity Risk * Types of Liquidity Risk Liquidity trading risk Liquidity funding risk Risk Management and Financial Institutions 2e, Chapter 19, Copyright ? John C. Hull 2009 * Liquidity Trading Risk Price received for an asset depends on The mid market price How much is to be sold How quickly it is to be sold The economic environment As we found in August 2007 transparency is factor that affects liquidity Risk Management and Financial Institutions 2e, Chapter 19, Copyright ? John C. Hull 2009 * Bid-Offer Spread As a Function of Quantity Risk Management and Financial Institutions 2e, Chapter 19, Copyright ? John C. Hull 2009 Offer Price Bid Price Quantity * Bid-Offer Spread Risk Management and Financial Institutions 2e, Chapter 19, Copyright ? John C. Hull 2009 * Cost of Liquidation in Stressed Markets Risk Management and Financial Institutions 2e, Chapter 19, Copyright ? John C. Hull 2009 * Liq