Liquidity is an asset’s ability to be sold without causing a significant movement in the price and with minimum loss of value. Money, or cash, is the most liquid asset, and can be used immediately to perform economic actions like buying, selling, or paying debt, meeting immediate wants and needs.

Author: Dario Cintioli, Product Director

This paper explains the StatPro approach for measuring liquidity risk. The traditional problem of  liquidity risk is that the data needed for calibrating these models is only available for liquid instruments, trading on a regular basis and for which books of bid/ask and volumes are available. For this reason the current approaches to measuring  liquidity risk fail providing any indication for the most opaque and illiquid instruments, or where the measurement of  liquidity risk is mostly needed.

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