liquidity risk

Definition

The risk that arises from the difficulty of selling an asset. An investment may sometimes need to be sold quickly. Unfortunately, an insufficient secondary market may prevent the liquidation or limit the funds that can be generated from the asset. Some assets are highly liquid and have low liquidity risk (such as stock of a publicly traded company), while other assets are highly illiquid and have high liquidity risk (such as a house).

Use liquidity risk in a sentence

You need to know how much of a liquidity risk any project is before you get to deeply involved in it.

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The liquidity risk of google stock is really low since the stock is performing really well and people generally want to buy it.

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Devon looked over his assets and determined that most of them had a pretty high liquidity risk despite their face value being so high.

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