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.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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We must however avoid overdiversification as this too can erode return on investment.We can hedge against liquidity risks first by ensuring that our spending budgets accurately reflect of our monthly expenses.

Hedging And Wealth Protection

''Significant constraints on banks' capacity and willingness to absorb potential increases in government financing needs in the event of a shock are intensifying government liquidity risks in Kenya (B2 stable),'' Moody's said in a report released on Tuesday.

Kenya should ease its home debts - Moodys

Shanghai: China's latest tightening of regulations on money market funds (MMF) is unlikely to slow sector growth significantly, but should lower liquidity risks marginally, said Fitch Ratings.

China's tightening of regulations unlikely to slow sector growth significantly

The BSP explained earlier that while the capital adequacy ratio cover solvency issues and risks, the NSFR and LCR will protect banks against liquidity risks which may happen even if a bank is still solvent.

BSP approves liquidity cover for big banks

China has said that it has launched new rules to protect lenders from liquidity risks.

China launches new rules to protect lenders

The stability of the Nigerian banking system comes after foreign currency liquidity risks moderated due to rising oil prices and a more liberal foreign exchange policy, says Moody's Investors Service in a report, Banking System Outlook -- Nigeria; Liquidity risks have eased but earnings pressure and loan quality risks remain.

Higher oil prices moderate Nigeria's foreign currency risks

Section III describes methods of constructing measures for liquidity risks and market power.

BANK COMPETITION AND FINANCIAL STABILITY: LIQUIDITY RISK PERSPECTIVE

It noted liquidity risks would always be present as banks expand their lending activities.

Banks urged to intensify measures vs liquidity risks

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.

FITCH: US HY FUNDS FACE WIDELY VARYING LIQUIDITY RISKS

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.

The relationship between stock liquidity risk and financial information quality criteria in Tehran stock exchange

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.The SEC oversees registered investment companies with combined assets of approximately $18.8 trillion and RIAs with approximately $67 trillion in regulatory assets under management, White noted.