We propose a tractable framework for quantifying the impact of fire sales on the volatility and correlations of asset returns in a multi-asset setting. Our results enable to quantify the impact of fire sales on the covariance structure of asset returns and provide a quantitative explanation for...

We propose framework for modeling portfolio risk which integrates market risk with liquidation costs which may arise in stress scenarios. Our model provides a systematic method for computing liquidation-adjusted risk measures for a portfolio. Calculation of Liquidation-adjusted VaR (LVaR) for...

This paper proposes an intuitive and flexible framework to quantify liquidation risk for financial institutions. We develop a model where the "fundamental" dynamics of assets is modified by price impact from fund liquidations (if any). We characterize mathematically the liquidation schedule of...