MSCI risk management analytics head and managing director Roveen Bhansali said that the 2008 financial crisis raised fundamental questions about liquidity risk.
"The launch of LiquidityMetrics comes at a time of increasing regulatory demand for risk controls that make credit more vulnerable to liquidity shocks and when the industry at large is calling for greater transparency and sophistication," Bhansali added.
Offering reliable set of metrics to assess liquidity across asset classes, the LiquidityMetrics delivers a strong description of asset liquidity and extends liquidity risk to include time, cost, and size dimensions.
Subsequently, the tool creates a single liquidity framework, which is suitable to be used by clients across their organization to support their investment management, risk management and regulatory risk reporting requirements.
Apart from allowing users to stress test the liquidity of a portfolio, the LiquidityMetrics measures market impact, transaction cost, liquidation horizon, amount available for liquidation and its value.
"The LiquidityMetrics methodology enables users to measure liquidity risk on asset classes that otherwise would have been impossible to measure, providing a more comprehensive picture of risk," Bhansali said.
