Measuring liquidity risk in Social Security using VaR technique

Abstract

Article history: Received October 15, 2012 Received in revised format 4 December 2012 Accepted 8 December 2012 Available online December 9 2012 Measuring liquidity risk plays an important role on any business unit especially financial organizations. Social security systems in most countries around the world are responsible to provide necessary requirements in many countries such as health care, pension plans, etc. Therefore, it is necessary to reduce any risk associated with these systems as much as possible. In this paper, we study liquidity risk in Iranian social security using VaR technique. The proposed model of this paper uses historical information for a fiscal year of 2008-2011. We first divide the information of each year into two groups of first and second half and using VaR technique analyzed whether there was any trend change in these two groups. The results of our survey indicate that the mean of VaR in the second half of the year is greater than the first half of the year. Therefore, we can confirm that VaR maintains an increasing trend over the time horizon. We also study the trend in liquidity using regression analysis for each year, separately and the results of our survey confirm that there was an increasing trend in liquidity over time. © 2013 Growing Science Ltd. All rights reserved.