Risk management for whales

Rama Cont (1) , Lakshithe Wagalath (1)

1 LPMA - Laboratoire de Probabilités et Modèles Aléatoires

We propose framework for modeling portfolio risk which integrates market risk with liquidation costs which may arise in stress scenarios. Our model provides a systematic method for computing liquidation-adjusted risk measures for a portfolio. Calculation of Liquidation-adjusted VaR (LVaR) for sample portfolios reveals a substantial impact of liquidation costs on portfolio risk for portfolios with large concentrated positions.

Domaines: Probabilités [math.PR]

Rama Cont, Lakshithe Wagalath. Risk management for whales. Risk, 2016, pp.73-80. ⟨hal-01396602⟩