Liquidity

Liquidity is the ease with which an asset can be converted into cash without substantial loss of value. It also describes how readily markets and institutions can meet payment obligations.

Bid–ask spread: The difference between the highest price a buyer will pay and the lowest price a seller will accept. A narrow spread usually signals low trading costs and stronger market liquidity.
Cash: Money held as currency or in accounts that can be used directly for payment. Cash is the benchmark against which the convertibility of other assets is judged.
Liquidity management: The planning and control of cash, funding, and liquid assets to meet financial obligations. It turns liquidity assessment into decisions about reserves, borrowing, and asset sales.
Marketability: The ease of finding a buyer for an asset, regardless of the price concession required. An asset can be marketable yet sell only at a substantial discount.
Market depth: The volume of buy and sell orders available at different prices in a market. Depth shows how much trading prices can absorb before moving sharply.
Market liquidity: The ability to trade an asset quickly, in quantity, and without substantially affecting its price. It describes liquidity in a particular market rather than an asset alone.
Liquidity coverage ratio: A bank regulatory measure requiring enough high-quality liquid assets to cover stressed net cash outflows for 30 days. It sets a minimum buffer against short-term funding stress.
Volatility (finance): The degree to which an asset’s price varies over time. Price fluctuation and ease of sale are distinct properties, though stress can connect them.
Market impact: The change in an asset’s price caused by executing a trade. Large price changes from modest trades reveal limited liquidity.
Funding liquidity: The ability of a person or institution to obtain cash or financing to meet obligations. It distinguishes access to funding from the ease of selling an asset.

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