Insurance Journal  Feb 18  Comment 
Mohamed El-Erian, chief economic adviser at Allianz SE, said Tuesday that Ukraine and Greece are major market risks, but that the biggest risk is the “illusion of liquidity.” “The biggest risk is this illusion of liquidity,” El-Erian told...
The Times of India  Feb 14  Comment 
With outstanding subsidy bills estimated to cross Rs 40,000 crore by March, the fertiliser industry is in a tight spot and is facing a severe liquidity crunch.
Reuters  Feb 12  Comment 
NEW YORK, Feb 12 (IFR) - Investor appetite for US junk bonds has rebounded strongly in the past few weeks, as stronger oil prices and better liquidity have helped draw billions of dollars back into...
The Times of India  Feb 8  Comment 
A liquidity mismatch in the banking system prompted the RBI to step in on Saturday and offer a two-day window to banks to tide over the situation.
Euromoney  Feb 6  Comment 
Bond investors may need to travel down darker paths to cope with reduced secondary market liquidity.
Financial Times  Feb 5  Comment 
Push to separate cost of research faces sector lobbying
MarketWatch  Feb 2  Comment 
Lack of liquidity in U.S. Treasury market is due to financial regulations and may be triggering mini “flash crashes.”


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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]


  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


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