Liquidity

RECENT NEWS
Reuters  Aug 25  Comment 
Reserve Bank of India Deputy Governor H.R. Khan said on Monday the revised framework on liquidity management will create predictability in the market.
Wall Street Journal  Aug 24  Comment 
U.S. regulators are expected to finalize safeguards next month that large banks hold enough safe assets—such as cash or those easily convertible to cash—to fund their operations for 30 days if other sources of funding aren't available.
The Hindu Business Line  Aug 22  Comment 
To arrest volatility in inter-bank call money market
The Economic Times  Aug 21  Comment 
"The RBI plans to articulate a comprehensive debt management strategy with sound international practice," the central bank said in its 2013/14 annual report.
SeekingAlpha  Aug 19  Comment 
By The Investment Doctor: African Minerals (OTCPK:AMLZF) has announced it is drawing down money from the project level to the parent company level in order to be able to meet its working capital requirements. This is quite a creative move as it...
The Economic Times  Aug 19  Comment 
"Given the liquidity and macro improvement and geopolitical risks abating, we are seeing the markets consolidating and probably going a bit higher."
StreetInsider.com  Aug 18  Comment 
Visit StreetInsider.com at http://www.streetinsider.com/Management+Changes/Banro+%28BAA%29+Enters+%2435.5M+Liquidity+Backstop+Facility%3B+Ammouncements+Mangement+Changes%2C+Operational+Update/9763561.html for the full story.
The Economic Times  Aug 18  Comment 
'Our sense is this is a short-term liquidity flow which is driving the markets. So, one needs to be cautious.'




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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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