MSCI, a provider of investment decision support tools, has launched LiquidityMetrics, the first commercially available tool for measuring liquidity risk across asset classes, delivered through RiskMetrics RiskManager.
Through its methodology, LiquidityMetrics provides a robust description of asset liquidity and extends liquidity risk to incorporate the time, cost, and size dimensions. This translates into a single liquidity framework that can be used by clients across their organization to support their investment management, risk management and regulatory risk reporting requirements.
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LiquidityMetrics enables users to stress test the liquidity of a portfolio, measure market impact, transaction cost, liquidation horizon, amount available for liquidation and the liquidation value.
Roveen Bhansali, managing director and head of risk management analytics for MSCI, said: "The launch of LiquidityMetrics comes at a time of increasing regulatory demand for risk controls that make credit more vulnerable to liquidity shocks and when the industry at large is calling for greater transparency and sophistication. This provides the first consistent set of metrics to assess liquidity across asset classes.
"The launch of LiquidityMetrics comes at a time of increasing regulatory demand for risk controls that make credit more vulnerable to liquidity shocks and when the industry at large is calling for greater transparency and sophistication. This provides the first consistent set of metrics to assess liquidity across asset classes.
"Measuring true liquidity risk across asset classes has remained elusive because of the limitations of models and data scarcity. The LiquidityMetrics methodology enables users to measure liquidity risk on asset classes that otherwise would have been impossible to measure, providing a more comprehensive picture of risk," Bhansali added.
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