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| This article is part of WikiProject Definitions. Consider editing to improve it. View articles referencing this definition. |
Toxic assets are assets for which the market has significantly plummeted. Toxic assets value is so uncertain that there is no functioning market for them (i.e., they're illiquid), and what market there is provides bids much lower than the holder is asking. A prime example is real estate that's value has declined well below the value of the mortgage.
Sale under these conditions (i.e., at a low bid in an illiquid market) would form a comparison point for mark-to-market writedowns of similar assets, which in turn could cause breech of regulatory requirements or loan covenents. Hence, the toxicity part of toxic assets is in part derived from the secondary effects of selling them.



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