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Are there any practical quantitative risk management strategies for a large participant in an illiquid market with a few dominant players? By a large partcipant I mean someone who

  • has significant share in the market turnover
  • holds large inventory
  • (therefore) could be a subject for predatory trading

By illiquid market I mean that trading is possible, however price impact is large and stealth liquidation of even a moderate position is not an option.

I'm currently looking for into a stress testing/scenario but may be there are better approaches?

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What you are asking sounds like something most people like to keep to themselves. It is similar to someone asking for a VWAP strategy that can handle highly illiquid stocks that trade in a 3-5 tick range in a given trading day. It makes no difference whether it is an actual trading strategy or a risk management strategy. A successful approach presents and edge and I think most people like to keep an edge to themselves. Just my hunch. –  Matt Wolf Jun 5 '13 at 4:44
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