Re: Defining Liquidity Risk ...

From: Andrewas Steiner
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Date: 23 Nov 2006
Time: 10:23:25

Comments

I fully agree that the meaning of leverage is at the very core of this debate (and several other debates). I can also confirm your observation that usage of "leverage" differs a lot. "25% of what?" - a (combined) 25% movement in the "market risk factor(s)" in the portfolio. "In other words, there is leverage and leverage, and the same level of leverage can produce vastly different levels of risk." - I agree; I am actually about to sort out the issues and also the terminology here... http://www.andreassteiner.net/performanceanalysis/?Risk_Measurement:Advanced_Topics:%26nbsp%3BLeverage%2C_Exposure_%26amp%3B_Risk ...it's a fragment only, have mercy. If time permits, I would like to expand that into an article. "Or, they could simply require that leverage be reported rather than VaR ..." - I think reporting both a leverage and a suitable market risk indicator would be the best solution. But maybe I'm the only one how would prefers a fund a with market risk b and leverage c over a fund x with market risk b but leverage 10*c...

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