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Liquidity Risk |
Also found in: Wikipedia | 0.01 sec. |
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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. How to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit webmaster's page for free fun content. |
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| Market's Risk Appetite: The general market's sentiment towards liquidity risk premium can be a significant factor. The federal banking, thrift, and credit union regulatory agencies on July 23, 2003, issued guidance on the appropriate use of the Federal Reserve's new primary credit discount window program in depository institutions' liquidity risk management and contingency planning. Liquidity risk refers to the inability to convert an instrument to cash, with little or no penalty for the conversion. |
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