Asset Management and Systemic Risk

Roncalli, Thierry; Weisang, Guillaume

doi:10.2139/ssrn.2610174

Cited by 10 publications

(10 citation statements)

References 38 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…While the results reported here are based on a cap-weighted portfolio, the authors use other weighting schemes to illustrate the impact of portfolio construction on the liquidation ratio. Source: Roncalli and Weisang (2015) The results show that: -S&P 500 based fund while being one of the largest fund (size of $50 billion) in the simulations, presents a better liquidity profile than smaller funds such as the one based on MSCI EM ($10 billion) or MSCI India ($1 billion). -A closer look at the indexes' capitalization provides a potential explanation: S&P 500 capitalization is equal to $18 trillion, while it is $4 trillion for MSCI EM and $381 billion for MSCI India.…”

Section: Current Us Macroprudential Policy Frameworkmentioning

confidence: 92%

See 1 more Smart Citation

The Asset Management Industry and Systemic Risk: Is There a Connection?

2016

View full text Add to dashboard Cite

Section: Current Us Macroprudential Policy Frameworkmentioning

confidence: 92%

“…>>> Box 3: Fund Size and Systemic Risk Roncalli and Weisang (2015) illustrate the difficulty of linking size and systemic risk for asset managers.…”

Section: Current Us Macroprudential Policy Frameworkmentioning

confidence: 99%

The Asset Management Industry and Systemic Risk: Is There a Connection?

2016

View full text Add to dashboard Cite

“…As explained by Roncalli and Weisang (2015a), the liquidation ratio will depend on three factors: the liquidity of the portfolio to sell, the amount to sell and the liquidation policy. They illustrated the impact of these factors using several index portfolios.…”

Section: Remark 12mentioning

confidence: 99%

Liquidity Stress Testing in Asset Management -- Part 2. Modeling the Asset Liquidity Risk

Roncalli¹,

Cherief²,

Karray-Meziou³

et al. 2021

Preprint

Self Cite

View full text Add to dashboard Cite

This article is part of a comprehensive research project on liquidity risk in asset management, which can be divided into three dimensions. The first dimension covers liability liquidity risk (or funding liquidity) modeling, the second dimension focuses on asset liquidity risk (or market liquidity) modeling, and the third dimension considers the asset-liability management of the liquidity gap risk (or asset-liability matching). The purpose of this research is to propose a methodological and practical framework in order to perform liquidity stress testing programs, which comply with regulatory guidelines (ESMA, 2019(ESMA, , 2020 and are useful for fund managers. The review of the academic literature and professional research studies shows that there is a lack of standardized and analytical models. The aim of this research project is then to fill the gap with the goal of developing mathematical and statistical approaches, and providing appropriate answers.In this second article focused on asset liquidity risk modeling, we propose a market impact model to estimate transaction costs. After presenting a toy model that helps to understand the main concepts of asset liquidity, we consider a two-regime model, which is based on the power-law property of price impact. Then, we define several asset liquidity measures such as liquidity cost, liquidation ratio and shortfall or time to liquidation in order to assess the different dimensions of asset liquidity. Finally, we apply this asset liquidity framework to stocks and bonds and discuss the issues of calibrating the transaction cost model.

show abstract

“…However, it is not certain that a redemption gate will have less impact than a redemption suspension. In a period of fire sales, gates can also exacerbate the liquidity crisis because of the asset liquidation/market transmission channel of systemic risk (Roncalli and Weisang, 2015a). On the contrary, redemption suspensions do not directly contribute to the asset liquidation from a theoretical point of view.…”

Section: Redemption Suspension and Gatementioning

confidence: 99%

Liquidity Stress Testing in Asset Management, Part 1. Modeling the Liability Liquidity Risk

Roncalli

Cherief²,

Karray-Meziou³

et al. 2020

SSRN Journal

Self Cite

View full text Add to dashboard Cite

This article is part of a comprehensive research project on liquidity risk in asset management, which can be divided into three dimensions. The first dimension covers the modeling of the liability liquidity risk (or funding liquidity), the second dimension is dedicated to the modeling of the asset liquidity risk (or market liquidity), whereas the third dimension considers the management of the asset-liability liquidity risk (or assetliability matching). The purpose of this research is to propose a methodological and practical framework in order to perform liquidity stress testing programs, which comply with regulatory guidelines (ESMA, 2019a(ESMA, , 2020a and are useful for fund managers. The review of the academic literature and professional research studies shows that there is a lack of standardized and analytical models. The aim of this research project is then to fill the gap with the goal of developing mathematical and statistical approaches, and providing appropriate answers.In this third and last research paper focused on managing the asset-liability liquidity risk, we explore the ALM tools that can be put in place to control the liquidity gap. These ALM tools can be split into three categories: measurement tools, management tools and monitoring tools. In terms of measurement tools, we focus on the computation of the redemption coverage ratio (RCR), which is the central instrument of liquidity stress testing programs. We also study the redemption liquidation policy and the different implementation methodologies, and we show how reverse stress testing can be developed. In terms of liquidity management tools, we study the calibration of liquidity buffers, the pros and cons of special arrangements (redemption suspensions, gates, side pockets and in-kind redemptions) and the effectiveness of swing pricing. In terms of liquidity monitoring tools, we compare the macro-and micro-approaches to liquidity monitoring in order to identify the transmission channels of liquidity risk.

show abstract

Asset Management and Systemic Risk

Cited by 10 publications

References 38 publications

The Asset Management Industry and Systemic Risk: Is There a Connection?

The Asset Management Industry and Systemic Risk: Is There a Connection?

Liquidity Stress Testing in Asset Management -- Part 2. Modeling the Asset Liquidity Risk

Liquidity Stress Testing in Asset Management, Part 1. Modeling the Liability Liquidity Risk

Contact Info

Product

Resources

About