At Ortec Finance we have been building and applying Economic Scenario Generator (ESG) models for decades, aimed at enabling people all over the world to manage the complexity of investment decision making. Over the years we have done a lot of R&D around this topic, and shared the results through various conference presentations. Although some cases are more than a decade old, the content of these “scenario modeling evergreens” is still very relevant today.

After VAR Models Do's and Don'ts, A Zero Phase Shift Band Pass Filter and Asset Classes and Business Cycles, a fourth such presentation from 2013 covers the estimation of liquidity risk premia.

Liquidity risk premia are a potentially important component of expected asset class returns. There is evidence of liquidity risk premia to exist for several asset classes, especially also for privately held assets. But in the literature different approaches are used by different authors. In this presentation one and the same methodology is applied to a wide range of asset classes to allow for a direct comparison of the estimated risk premia.

In today’s world of low interest rates many investors consider investing in privately held assets. Consistent estimates of the potential liquidity risk premia to expect from those investments are also very relevant today. We are happy to share some of our learnings on liquidity risk premia with you. Click here to find out more about our Economic Scenario Generator (ESG) models.

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