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 ?
Management of liquidity risks is important to funds' ability to meet their statutory obligation and their investors expectations regarding redemption of their shares.
It noted liquidity risks would always be present as banks expand their lending activities.
The objective is to ensure that liquidity risks are well managed and in line with international standards.
Investor s redeemed several billion dollars' worth of shares in US high-yield bond funds following the Third Avenue Focused Credit Fund's redemption halt in December, highlighting the importance of assessing liquidity risks within mutual funds.
Market characteristics: Some of the characteristics of the market are expected to affect a company's stock liquidity risk in this research, including stock liquidity, volume of shares traded, and can be past returns and firm size, and are presented in the model as a control variable affecting stock liquidity risks.
Swing pricing would enable mutual funds, subject to board approval and oversight, to reflect in a fund's net asset value (NAV) costs associated with shareholders' trading activity, and "is designed to protect existing shareholders from dilution associated with shareholder purchases and redemptions and would be an additional tool to help funds manage liquidity risks," the agency states.
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.