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 ?
The AxiomSL integrated platform was chosen for BOCSG s strategic liquidity risk management and regulatory reporting after a stringent market review.
Global Banking News-October 12, 2015--Bank of China Singapore hires AxiomSL for Basel III liquidity risk management
Concern about market participants' ability to manage liquidity risk is being stoked by a combination of factors, including: a multi-year decline in dealer inventories; a sharp increase in the supply of outstanding debt instruments, with no comparable increase in trading volume; and anticipation that future interest rate increases could trigger a flight from fixed income assets.
Abu Dhabi: The Central Bank of the UAE has laid out a roadmap to introduce tougher conditions for banks and financial institutions to comply with Basil III Accord on capital adequacy, stress testing and market liquidity risk.
MANAMA: The General Council for Islamic Banks and Financial Institutions (CIBAFI), a global umbrella of Islamic financial institutions, has announced it is holding a technical workshop on liquidity risk management next month.
as well as discusses how these interactions affect both the way an Islamic finance institution contemplates its financial decisions, and how regulators formulate appropriate liquidity risk management policies.
The General Council for Islamic Banks and Financial Institutions (CIBAFI) has submitted feedback to the Islamic Financial Services Board (IFSB) on a new regulation for management of liquidity risk in Institutions.
This includes an enhanced liquidity risk reporting regime, spearheaded by the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) liquidity risk metrics.
Liquidity risk is a risk that bank will not be able to cover obligations for its depositors.
The seminar included a number of lectures on activating the second standard for Basel-II, the design and implementation of the capital adequacy, the interest rate risks and the liquidity risk as per the recommendations of Basel-III, the impact of the new measures on risks management and the self-evaluation for capital efficiency from the point of view of the regulatory bodies and the recommendations of Basel-III.
Manama-May-20(BNA)The Central Bank of Bahrain (CBB) today launched, in cooperation with The Union of Arab Banks, a specialized banking workshop entitled: "Practical Implementation of Liquidity Risk Management and the Internal Capital Adequacy Assessment Process (ICAAP) According to Basel III Requirements," which will run for three consecutive days.
Because the crisis exposed weaknesses in its liquidity risk models, and TFS went to work to build a better mousetrap, explains Amit Shroff, head of financial planning and analysis and market risk for the Torrance, Calif.