Abstracts

Liquidity risk is an important type of risk, especially during times of crises. As observed by Acerbi and Scandolo (2008), it requires adjustments to classical portfolio valuation and risk measurement. Main drivers are two dimensions of liquidity risk, namely price impact of trades and limited access to financing. The key contribution of the current presentation is the construction of both single- and multi-objective liquidity-adjusted risk measures that can naturally be interpreted as capital requirements. In the multi-dimensional setting, portfolios are modeled in physical units as originally suggested by Kabanov (1999). Numerical case studies illustrate how price impact and limited access to financing influence the liquidity-adjusted risk measurements.