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Liquidity Risk - Relevance to Actuaries [29]

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Bullet points include: Arguments in favour of TVaR are usually expressed in relatively mathematical language. Around the concept of coherence. E.g. 99% confidence level, firm A has one exposure to a 1 in 500 risk of loss of 100m, firm B has ten (independent) exposures to 1 in 500 risks of loss of 10m. VaR for A (=0) less than VaR for B, even though B better diversified. TVaR behaves more ‘sensibly’.

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