Abstract
As we continue with our discussion of the theoretical and practical nature of liquidity risk problems, we turn our attention to asset liquidity risk, which we have defined as the risk of loss arising from an inability to convert assets into cash at carrying value when needed. Asset liquidity risk is sometimes known as market liquidity risk, since the process relates to the market price that is assigned to, and can be obtained by, a portfolio of assets. In fact, the market value of an asset has two primary sources of risk: the uncertainty of asset returns (that is, pure market risk) and the uncertainty of liquidity risk (that is, pure liquidity risk), and the two may be strongly correlated.
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© 2005 Erik Banks
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Banks, E. (2005). Asset Liquidity Risk. In: Liquidity Risk. Finance and Capital Markets Series. Palgrave Macmillan, London. https://doi.org/10.1057/9780230508118_5
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DOI: https://doi.org/10.1057/9780230508118_5
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-51700-8
Online ISBN: 978-0-230-50811-8
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