Asset Allocation With Liquidity-Adjusted Market Risk Modeling: Empirical Relevance To Emerging GCC Financial Markets

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Executive Summary

The aim of this paper is to bridge the gap in equity trading risk management literatures and particularly from the perspective of emerging and illiquid markets, such as in the context of the Gulf Cooperation Council (GCC)'s six financial markets. To the authors' best knowledge, this is the first research paper that addresses the issue of equity trading risk management in the GCC countries with direct applications to their six stock markets. In this paper, the authors demonstrate a practical approach for measurement, management and control of market and liquidity risk exposures for financial trading portfolios that contain several illiquid equity securities.

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