Financial risks Examples
Key Takeaways
Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price.
Cash is the most liquid of assets, while tangible items are less liquid.
The two main types of liquidity are market liquidity and accounting liquidity..
Financial risks Examples
The liquidity risk factor (LRF) measure is a static snapshot that shows the aggregate size of the liquidity gap: it compares the average tenor of assets to the average tenor of liabilities.
The higher the LRF, the larger the liquidity gap and hence the greater the liquidity risk being run by the bank..
How is liquidity related to risk?
Liquidity is a bank's ability to meet its cash and collateral obligations without sustaining unacceptable losses.
Liquidity risk refers to how a bank's inability to meet its obligations (whether real or perceived) threatens its financial position or existence..
What is liquidity risk in simple words?
Liquidity is a bank's ability to meet its cash and collateral obligations without sustaining unacceptable losses.
Liquidity risk refers to how a bank's inability to meet its obligations (whether real or perceived) threatens its financial position or existence..
