A bank's liquidity risk lays in the intersection of funding risk and market liquidity risk. We offer a mathematical framework to make Economic Capital and RAROC sensitive to illiquidity. We introduce the concept of a liquidity cost profile as a quantification of a bank's illiquidity at balance...

Although most of the theory development concerning risk measures has concentrated on convex or even coherent risk measures, nonconvex risk measures are used in practice, the prime example of course being Value-at-Risk. The purpose of this paper is to investigate the relations between various...