Liquidity Risk And Risk Management Essay

1266 Words Nov 5th, 2016 6 Pages
As we have learned, liquidity risk is the risk that a given security or asset can 't be exchanged rapidly enough in the market to preventing losses from occurring. Liquidity is a financial institution’s, such as banks, insurance companies, and investment banks, capacity to meet its money and collateral commitments without causing unsuitable misfortunes. Adequate liquidity is reliant upon the foundation 's capacity to proficiently meet both expected and unforeseen money streams and security needs without antagonistically influencing either every day operations or the budgetary state of the organization.
In addition, liquidity-risk management has the primary role to not only tentatively assess the requirement for funds to meet obligations and to guarantee the accessibility of money or collateral to satisfy those necessities at the suitable time by efficiently planning the various sources of assets accessible to the organization. The financial intermediaries provide many great avenues for which investors can change over their securities effortlessly in order to meet their commitment if there should arise an occurrence of a money related misery. Securities (bonds, shares, and debentures) can be traded freely within the monetary markets, which allow the intermediaries to act as the link or connection between the investors and the borrowers of assets inevitably alleviating the change of liquidity by further lessening.
Securities, for example, securities, shares and debentures…

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