Liquidity premium: Difference between revisions
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1. A term used to explain a difference between two types of financial securities, for example stocks, that have all the same qualities except liquidity. | 1. | ||
A term used to explain a difference between two types of financial securities, for example stocks, that have all the same qualities except liquidity. | |||
2. | |||
A premium that investors will demand when any given security can not be easily converted into cash, and converted at the fair market value. | |||
When the liquidity premium is high, then the asset is said to be illiquid, which will cause prices to fall, and interest rates to rise. | |||
== See also == | == See also == | ||
* [[Illiquid]] | * [[Illiquid]] | ||
* [[Liquidity]] | * [[Liquidity]] | ||
Revision as of 11:12, 22 August 2013
1.
A term used to explain a difference between two types of financial securities, for example stocks, that have all the same qualities except liquidity.
2.
A premium that investors will demand when any given security can not be easily converted into cash, and converted at the fair market value.
When the liquidity premium is high, then the asset is said to be illiquid, which will cause prices to fall, and interest rates to rise.
