What is market liquidity?
market liquidity refers to how easily security or investment can be sold and transferred to cash without having a large impact on value or price. If the safety of liquidation is, this means that the investor can have immediate access to money, as the investment can be quickly sold at a fair market price. The level of market liquidity can be influenced by the amount of trade -related business, as well as other factors such as bond evaluation, due date and existence of the diving fund. Foreign investments have different degrees of liquidity due to the laws that governed the redemption of shares from other countries. The liquidity of the market is also related to the risk of liquidity, which includes the possibility that safety cannot be easily sold.
There are several aspects that can affect market liquidity, especially for bonds. The evaluation and quality of the investment can affect liquidity because some investors only buy highly evaluated securities. You a fiddling amount of time until maturity ismore liquid than long -term securities. The coupon rate, the current market value, the issuer and any call function can determine how attractive the security for the buyer is, which in turn affects liquidity. If the issuer has set up a diving fund, it usually causes bonds to liquidate more because the administrator allows you to allocate cash to apply bonds, call them, or bought them back to the open market.
Foreign investments also have factors that affect market liquidity. The hours during which the foreign market is open to trading may vary and may vary from market hours in the investor's country. The size of foreign markets can also play a role in liquidity. In addition, some countries limit foreign countries from which investments can be purchased. There may also be laws that limit the refund of back home countries from the sale of foreign investment.
some types of investment usually afterThey consider high market liquidity, while others are generally considered to be illicit. For example, money market tools are usually liquid because they have one year or less up to maturity. Many bonds and securities of the United States Treasury are liquid because they usually have numerous buyers and sellers at the moment. On the other hand, deposit certificates of real estate and banks are unfamiliar because they cannot be transferred quickly or easily to cash.
Investors dealing with market liquidity should also be aware of the risk of liquidity. This type of risk is the chance that safety is rarely sold or not at all. In some cases, security can only be sold for a large discount or with the loss of principal. The risk of liquidity may also apply that the issuer is not able to pay the full amount of the debt obligation to the due date.