What My Friend Means to say is ...
Research Paper
July 6, 2009
Preview
Though we are by now accustomed to the exhortations to measure liquidity risk or define a liquidity risk appetite, there are still few precise definitions of what liquidity risk actually is. In a recent paper, Acerbi and Scandolo propose a formalism that links asset liquidity, in the form of market depth, with funding liquidity, in the form of an institution's specific needs, and revisits even the notion of portfolio valuation. The paper being somewhat abstract, we summarize its ideas and provide some discussion in a non-technical setting.
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