Risk allocation games are cooperative games that are used to attribute the risk of a financial entity to its divisions …. In this paper, we extend the literature on risk allocation games by incorporating liquidity considerations. A liquidity … financial entity may have to liquidate part of its assets, which is costly. The definition of a risk allocation game under …

risky assets. Using coherent measures of risk the sum of the capital requirements of the divisions is larger than the … jointly satisfy three natural fairness requirements for allocating risk capital in illiquid markets: Core Compatibility, Equal … Treatment Property and Strong Monotonicity. Core Compatibility can be viewed as the allocated risk to each coalition (subset) of …

Risk allocation games are cooperative games that are used to attribute the risk of a financial entity to its divisions …. In this paper, we extend the literature on risk allocation games by incorporating liquidity considerations. A liquidity … financial entity may have to liquidate part of its assets, which is costly. The definition of a risk allocation game under …

We revisit the role of liquidity risk. We successfully replicate Pastor and Stambaugh's (2003) gamma liquidity risk … index and, within their time period, concur with their risk premium estimate. An out-of-their-time-period analysis finds … compensation for liquidity risk. We create five alternative liquidity risk indices from various popular liquidity proxies. Using …