Forced Liquidations, Fire Sales, and the Cost of Illiquidity
指出机构投资者在追求分散化时常忽视非流动性投资的隐性成本，并提出一个简单的期权调整回报率来评估这种非流动性成本。
Seeking diversification, institutional investors are often drawn to investment opportunities that are relatively illiquid, taking for granted that they will receive a liquidity premium that compensates them for the lack of liquidity. Forced liquidations typically occur when illiquid portfolios become overvalued relative to their true market value and the reported valuation is no longer credible. When a forced liquidation occurs, the significant associated costs are obvious and easy to take into account. But there is a rarely recognized cost that investors should apply to illiquid investments’ expected return before such an event. This article presents a simple option-adjusted return for evaluating the cost of such illiquidity. <b>TOPICS:</b>Exchanges/markets/clearinghouses, VAR and use of alternative risk measures of trading risk, real assets/alternative investments/private equity