Market liquidity

In a liquid market, the trade-off is mild: one can sell quickly without having to accept a significantly lower price.

[1] A liquid asset has some or all of the following features: it can be sold rapidly, with minimal loss of value, anytime within market hours.

Speculators are individuals or institutions that seek to profit from anticipated increases or decreases in a particular market price.

Financial institutions and asset managers that oversee portfolios are subject to what is called "structural" and "contingent" liquidity risk.

When a central bank tries to influence the liquidity (supply) of money, this process is known as open market operations.

In addition, risk-averse investors require higher expected return if the asset's market-liquidity risk is greater.

Initial buyers know that other investors are less willing to buy off-the-run treasuries, so the newly issued bonds have a higher price (and hence lower yield).

Some future contracts and specific delivery months tend to have increasingly more trading activity and have higher liquidity than others.

The investment portfolio represents a smaller portion of assets, and serves as the primary source of liquidity.

In a worst-case scenario, depositors may demand their funds when the bank is unable to generate adequate cash without incurring substantial financial losses.