Exogenous vs Endogenous Liquidity : A Comparative Look
1. Context
In this short video from FRM Part 2, we take a quick look at how VaR is impacted by Transaction or Asset liquidity. This analysis forms the base for understanding the need for Liquidity Adjusted VaR. We then further build on our reasoning and differentiate between Endogenous and Exogenous liquidity. The details of the reading in which this topic appears are given below:
| Area | Operational and Integrated Risk Management |
| Reading | Estimating Liquidity Risks |
| Reference | Kevin Dowd, Chapter 14. Estimating Liquidity Risks In Measuring Market Risk, 2nd Edition, (West Sussex, England: John Wiley & Sons, 2005). |