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Asset Liquidity Risk

  • Erik Banks
Part of the Finance and Capital Markets Series book series (FCMS)

Abstract

As we continue with our discussion of the theoretical and practical nature of liquidity risk problems, we turn our attention to asset liquidity risk, which we have defined as the risk of loss arising from an inability to convert assets into cash at carrying value when needed. Asset liquidity risk is sometimes known as market liquidity risk, since the process relates to the market price that is assigned to, and can be obtained by, a portfolio of assets. In fact, the market value of an asset has two primary sources of risk: the uncertainty of asset returns (that is, pure market risk) and the uncertainty of liquidity risk (that is, pure liquidity risk), and the two may be strongly correlated.

Keywords

Cash Flow Market Maker Liquidity Risk Operate Cash Flow Liquidity Problem 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Erik Banks 2005

Authors and Affiliations

  • Erik Banks

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