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Liquidity Crisis

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Definition of Liquidity Crisis

Liquidity Crisis Image 1

Liquidity Crisis

Situation in which a firm is unable to meet due bills; a period of "technical insolvency".



Related Terms:

Accounting liquidity

The ease and quickness with which assets can be converted to cash.


Liquidity

A market is liquid when it has a high level of trading activity, allowing buying and selling with
minimum price disturbance. Also a market characterized by the ability to buy and sell with relative ease.


Liquidity

A measure of the ability of a business to pay its debts as they fall due – see also working capital.


Liquidity

A term that means nearness to cash; the closer an asset is to becoming cash or a liability is to using cash, the more liquid that asset or liability is.


Liquidity

The ease with which assets or securities can be sold for cash on
short notice at a fair price



liquidity

Ability of an asset to be converted to cash quickly at low cost.


Liquidity

Ease with which an asset can be sold on short notice at a fair price.


Liquidity Crisis Image 2

Liquidity

The degree to which an asset can be cheaply and quickly turned into money.


Liquidity diversification

Investing in a variety of maturities to reduce the price risk to which holding long
bonds exposes the investor.


Liquidity preference hypothesis

The argument that greater liquidity is valuable, all else equal. Also, the
theory that the forward rate exceeds expected future interest rates.


Liquidity premium

Forward rate minus expected future short-term interest rate.


Liquidity ratios

Ratios that measure a firm's ability to meet its short-term financial obligations on time.


Liquidity ratios

Ratios that measure a firm's ability to meet its short-term financial obligations on time.


Liquidity risk

The risk that arises from the difficulty of selling an asset. It can be thought of as the difference
between the "true value" of the asset and the likely price, less commissions.


Liquidity theory of the term structure

A biased expectations theory that asserts that the implied forward
rates will not be a pure estimate of the market's expectations of future interest rates because they embody a
liquidity premium.


Restricted Liquidity

Inability of an individual/company to convert an asset into cash or cash equivalent without significant cost.



 

 

 

 

 

 

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