The VT Index as an Indicator of Market Liquidity Risk in Slovakia
The VT Index as an Indicator of Market Liquidity Risk in Slovakia
Author(s): Michal Vrábel, Petr Teplý, Liběna ČernohorskáSubject(s): Economy
Published by: Ekonomický ústav SAV a Prognostický ústav SAV
Keywords: funding liquidity; global financial crisis; liquidity risk; market liquidity; regulation; Slovakia; VT index
Summary/Abstract: In this paper we construct a new market liquidity index for Slovakia (called the VT index) based on the calculation of using traditional indicators of market depth, resiliency, tightness, volatility and liquidity for four markets (money, foreign exchange, bond and stock market) and back-tested the index for the years 2001 – 2008. The VT index began decreasing in the first half of the year 2008 and continued to fall after Lehman Brothers’ collapse in September 2008. Al-though market liquidity deteriorated globally, major liquidity problems were avoided by individual financial institutions in Slovakia, due to relatively strong macroeconomic fundamentals of the Slovak economy in the pre-crisis period.
Journal: Ekonomický časopis
- Issue Year: 60/2012
- Issue No: 03
- Page Range: 223-238
- Page Count: 16
- Language: English
