The **Liquidity-at-Risk** (short: **LaR**) is a quantity to measure financial risks and is the maximum net liquidity drain relative to the expected liquidity position which should not be exceeded at a given confidence level (e.g. 95%). The LaR is analog to the Value-at-Risk (VaR) where a quantile of the EBIT-distribution is considered, however it does take stochastic cash flows into account.^{[1][2]}

Critics

Statistical measures for financial risk are not intuitive. Increasing the confidence level (e.g. from 99.0% to 99.9%) does not capture very rare events with possibly high impact. The only way around is to use extreme value theory for modelling the distribution tails. In other words: Statistical liquidity risk modelling approaches do not provide certainty in terms of a reliable lower limit for future liquidity.

References

**^***“Liquidity-at-Risk (LaR) of a German private bank”. extreme-value-theory.com. Buxtehude, Germany: RC Banken-Consulting GmbH & Co. KG. 2011. Retrieved 12 January 2016.***^***Conzen, Sander (6 September 2009). Liquidity at Risk (LaR) und LiquidityValue at Risk (LVaR): Zwei neue Ansätze für das Liquiditätsmanagement (in German) (Frankfurt School of Finance & Management ed.). Hamburg, Germany: Diplomica. ISBN 978-3-8366-3500-4. Retrieved 12 January 2016.*

Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.