Managing Illiquid Assets: Perspectives and Challenges

Valuation and management of illiquid assets is an ongoing concern of financial institutions, even during so-called “normal” market conditions with low volatility. When markets are volatile, experiencing a liquidity squeeze, or during a full blown credit crunch, the concern can quickly turn into a full-time occupation. In this new book, the authors cover several aspects of the valuation and ongoing management of illiquid assets that contribute to this concern, including: liquidity risk management perspectives and challenges; External methods and approaches available in the literature for valuing illiquid assets; Liquidity problems related to the US mortgage market; Main regulatory responses to the financial crisis for liquidity risk management; Key issues on liquidity risk in the Basel III regime; A new mathematical model to incorporate a liquidity value adjustment for OTC contracts; Risk Management Best Practices; and the limits of existing risk management systems with regard to the future of risk management. Bringing together the views of experts and practitioners regarding the management of these risky and often complex financial assets, it examines all of the key issues related to the valuation of illiquid assets.
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