Liquidation costs can be significant for large positions or concentrated positions. A proper
disposition of an unusually large position would often take additional time beyond the stated risk horizon to achieve, therefore resulting in a liquidation horizon that is greater than the risk horizon. As a result, there is a nonlinear relationship between liquidation
costs and portfolio size. A typical risk measure such as SD, VaR, or ES has a 1:1 linear relationship to portfolio notional size (N). In contrast, the relationship between liquidation cost to position size is N x N^(1/2), or N^(3/2) . For example, if N is doubled, SD, VAR, and ES
would double as well but liquidation costs would increase by 2.83 times (2^(3/2))
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