liquidity risk

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Liquidity risk

The risk that arises from the difficulty of selling an asset in a timely manner. It can be thought of as the difference between the "true value" of the asset and the likely price, less commissions.

Liquidity Risk

The risk that an individual or firm will have difficulty selling an asset without incurring a loss. That is, there may be a lack of interest in the market for a particular asset, forcing the owner to sell it for less than its actual value. Liquidity risk may be quantified as the difference between an asset's value and the price at which it can likely be sold. It is highest for lightly traded securities and small issues, as well as during a bear market.

liquidity risk

The risk of having difficulty in liquidating an investment position without taking a significant discount from current market value. Liquidity risk can be a significant problem with certain lightly traded securities such as unlisted options and municipal bonds that were part of small issues. Also called marketability risk.
References in periodicals archive ?
Managing Liquidity and Liquidity Risks to Promote Financial Stability
Measures to address the structural liquidity risks and potential funding squeeze in Sweden would be taken soon, said Uldis Cerps, executive director for banking at the Swedish Financial Supervisory Authority.
Muscat, Oct 7 (ONA) The three-day Seminar on the Self-Evaluation for Capital Adequacy and the New Standards and Requirements for the Management of Liquidity Risks, organized by the Arab Banks Union in collaboration with the Central Bank of Oman (CBO) kicked off at Crowne Plaza Hotel today.
Summary: ALGIERS- A new regulation on the bank liquidity risks is in preparation and is due to be submitted to the Credit and Money Council (CMC) by the end of the current year, announced Sunday here Bank of Algeria Governor Mohamed Laksaci.
The paper, he said, highlights the liquidity risks instruments and procedures Jordan is carrying out in dealing with Jordan Islamic Bank.
By enhancing the availability of discount window credit, the Federal Reserve's new primary credit program offers depository institutions an additional source of backup funds for managing short-term liquidity risks and thus can enhance the diversification of contingency funds.
S&P) said Monday it has placed its A-2 short-term ratings on UFJ Bank, UFJ Trust Bank and their related entities on credit watch with negative implications due to growing concerns over the group's liquidity risks.
Regulators weigh the liquidity risks in guaranteed investment contracts and similar instruments after General American's ordeal.
Separating credit and liquidity risks reduces capital charges for liquidity banks, making it more attractive for them to offer such facilities.
It discusses the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) and other monitoring tools proposed by the Basel-III arrangement to monitor liquidity risks by the banks and supervisors.
They also research the markets to minimize interest-rate and liquidity risks, he said.