Liquidity Risk - Relevance to Actuaries [31]

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Bullet points include: VaR: focuses on the PD element alone. TVaR: also takes into account the LGD. Markets (and some parts of existing regulatory frameworks) recognise the need to take into account LGD as well as PD when valuing and assessing the riskiness of a credit sensitive instrument. Why don’t we therefore apply it to the whole portfolio?

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