A fourth scenario modeling evergreen: Estimating Liquidity Risk Premia
28 August 2019
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.
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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