Liquidity

RECENT NEWS
Yahoo  Apr 17  Comment 
The Fed had excluded debt issued by cities and states when it approved liquidity rules for large banks in September, part of a global effort to make banks such as JPMorgan Chase and Citigroup more resilient in a financial crisis. Fed officials had...
The Hindu Business Line  Apr 15  Comment 
Emerging markets with foreign debt at risk
Financial Times  Apr 14  Comment 
With yields lower than ECB’s floor, Moody’s warns that bonds could run out at ‘end of the year’
Mondo Visione  Apr 14  Comment 
Neonet Securities, the independent agency broker and execution specialist, together with LiquidMetrix, the financial market data research and execution quality analysis expert, has published a mutual white paper analysing the likely impacts and...
Motley Fool  Apr 12  Comment 
Management teams are telling investors they have plenty of liquidity to ride out the oil cycle, but this liquidity could dry up pretty quickly.
Yahoo  Apr 9  Comment 
The former Treasury secretary said regulators should make a priority of addressing the problems of bond market liquidity, brought on by efforts to make institutions safer after the crisis.




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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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