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 ?
Contract notice: the purpose of this procedure is to conduct a liquidity risk management audit (s) within the acoss treasury department as part of the treasury management
Liquidity risk is associated with assets that are not easy to sell or assets whose pricing is subjective.
Kenya risks severe exposure to liquidity risk in case of significant shock in domestic banking sector, global rating agency Moody's has said.
The primary focus of this criteria report is on the key rating considerations in assessing a MMF's (or other liquidity/cash management product's) capacity to meet its investment objective of preserving principal and providing liquidity through limiting credit, market and liquidity risk. The criteria are applicable to constant net asset value, variable/floating net asset value (NAV), and European low-volatility NAV (LVNAV) funds as the focus is on a manager's ability to avoid losses through limiting credit, market and liquidity risk rather than the particular accounting convention used to calculate NAV.
Pappion will lead the bank's retail branch network and treasury functions, including capital planning, liquidity risk management and funding, asset liability management, financial planning and analysis, and investment portfolio management.
The bank is to use Kamakura's NSFR module to measure, manage and control its long-term liquidity risk.
Today, one of the most popular kinds of risks for banking sector is the liquidity risk, which is the result of disparity of the two sides of the balance sheet.
The disclosures should also make it more apparent when an NFP is in a strained financial situation.<br />NFPs will need to develop and implement a policy to comply with qualitative information disclosure requirements for managing liquidity and liquidity risk. If an NFP doesn't currently have such a policy, the NFP should consider working with its management team and governing board to establish the policy.
On the other hand, smaller institutions comprising of stand-alone thrift banks, rural banks, cooperative banks, and quasi-banks are subject to the minimum liquidity ratio (MLR) requirement that better suit their simpler liquidity risk profile.
Thrift banks and rural banks as well as quasi banks, in the meantime, have their own minimum liquidity ratio for their simpler liquidity risk profile.
The SEC's sweeping reporting modernization and liquidity risk management rules place an added operational burden on asset managers.
On the one hand, competition contributes to lower liquidity risk because banks with greater market power take on more liquidity risk by granting more loans and reducing liquid reserves (Carletti and Leonello 2014; Petersen and Rajan 1995).