Bloomberg unveiled its Liquidity Assessment Tool (LQA), a new solution aims to provide institutional investors with a quantitative approach to calculating liquidity risk across asset classes. Bloomberg claims that it is the first liquidity estimation tool to combine the companys financial data and machine learning techniques to calculate the multitude of relevant factors influencing liquidity, according to a press statement.
In practice, Bloomberg LQA aims to provide risk managers, portfolio managers, traders, and compliance officers with a standard definition of liquidity and a consistent approach to measuring the expected cost of liquidation for a specific volume of securities, and a desired time horizon. The new solution also provides a score designed to indicate security-level liquidity with respect to liquidation cost and its distributions across different volumes, per company claims.
Assessing liquidity risk is an essential business process for both buy-side and sell-side institutions because they need to assess the cost of capital for any asset they want to hold in their portfolio or on their balance sheet, said Ilaria Vigano, head of the regulatory and accounting products group at Bloomberg. Bloomberg LQA provides a consistent data-driven approach to measuring liquidity that helps our clients make more informed investment decisions, as well as simplify their regulatory reporting and risk management processes.
Bloomberg Professional service subscribers can access Bloomberg LQA data for more than 130,000 global government and corporate securities. The same data can also be provided for enterprise use, which allows clients to override Bloomberg’s default inputs with their own assumptions so the model considers their unique perspective on the market.
