Forced Liquidation

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Forced Liquidation

A situation in which an outside party can force the sale of an asset belonging to another. For example, a bank may force a borrower to sell his/her collateral in order to repay the debt. Likewise, a brokerage can force a client to sell securities if the client is unable to meet a margin call and preferred stockholders can (sometimes) force the liquidation of a publicly-traded company if it does not make preferred dividend payments.
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A few billion dollars were lost, leading to forced liquidations, and a reminder that traders must sell what they can, not what they want to in order to raise cash.
There, the anticipation of future benefit cuts caused waves of early retirements, forced liquidations of immature assets, and a spiraling decline of pension fund balances," Keller said.
Through the first leg of the financial crisis, the yen was rising as traders deleveraged direct or indirect carry trades through a need for cash, natural repatriation and frequently forced liquidations.
They find that, in the aggregate, promised payments to creditors exceed liquidation values and conclude that the Japanese bankruptcy system can create value compared to a system of forced liquidations.
The past quarter was challenging for all money managers due to market volatility and massive forced liquidations by hedge funds, which has hurt all asset classes," says Mr.