Liquidity

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The demonetisation exercise has clearly made the system pause, take stock and think about how to navigate the next few quarters in the best possible manner.
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Asian stocks tried to stabilise after a rocky November month drew to a close, but Wednesday's session brought new anxieties as Chinese equities and commodities tanked amid worries that Beijing's effo...
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Asian stocks tried to stabilise after a rocky November month drew to a close, but Wednesday's session brought new anxieties as Chinese equities and commodities tanked amid worries that Beijing's efforts to support its currency could squeeze ...
The Economic Times  Nov 29  Comment 
According to a top finance ministry official, interest rate cannot be allowed to fall below a level that would lead to flight of capital.
The Hindu Business Line  Nov 28  Comment 
Finance Ministry today said the RBI raising CRR became necessary due to increase in liquidity in the system as large sums of money in the form of scrapped Rs 500/1000 notes is being deposited by the ...
The Hindu Business Line  Nov 28  Comment 
Severe shortage of currency notes compels the apex bank to start issuing soiled smaller denomination notes




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Liquidity

Liquidity is defined as the ability to trade large size quickly at a low cost. It is one of the most important characteristics of a market. A liquid market allows traders to implement their strategies cheaply, normally with a limited bid/ask spread. A liquid market is characterized by high volume. It is generally less volatile than an illiquid market.

Usually, you can refer to three dimensions of liquidity - time, size and cost:

• “Immediacy” refers to how quickly you can execute a trade of a given size at a given cost.

• Width refers to the cost of executing a trade of a given size, including commissions.

• Depth refers to the size of a trade that can be executed at a given cost. Width and depth are very strictly related.

A liquid market is a market where you can trade large size quickly at low cost. Liquidity refers to how quickly you can convert your assets into cash. [1] Liquidation is the conversion of assets into cash by an Investor getting rid of a position in a particular type of security. [2]

For example, a portfolio manager might decide to liquidate a position in a stock by selling all the shares of that stock held in the portfolio. [3]

1610s, from liquidus. [1] Liquid Financial sense of "capable of being converted to cash" is first recorded 1818. [2]

References

  1. Stock Investing for Dummies‬ By Paul Mladjenovic pg22 ISBN-10: 0470401141
  2. Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott Accounting Professor ISBN-10: 0618176519 pg 212
  3. 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. ISBN-10: 0618176519 pg212

4. http://www.bestcashloans.org.uk/

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