The Measurement of Integrated Risk between Market Risk and Liquidity Risk
Liang Wei · Journal of Beijing Institute of Technology · 2010
The integration of market risk and liquidity risk facilitates the investors' comprehensive management of risks when they trade their stocks.Considering the time variation,heteroscedasticity and tail characters of market risk and liquidity risk,GARCHEVT method is used for the modeling of these properties.Three types of Archimedean Copula are used to investigate the dependence structure between two kinds of risks.The results indicate that the two kinds of risks show stronger dependence in the tails and the two tails are symmetric.The measurement based on such dependence structure performs better than traditional VaR and the VaR without regard to the dependence structure.