he will not be able to trade in his existing bond for a bond paying a higher interest rate. On the other hand, he would be able to sell his shorter term, more liquid bond to trade into a better-paying investment; so the liquidity premium exists because the shorter term bond gives him...
Liquidity is a company’s ability to convert its assets to cash in order to pay its liabilities when they are due. Current Assets Generally, the assets that are expected to turn to cash within one year are reported on the balance sheet in the section with the heading current assets. Curren...
What is an Expectations Theory? In Physics, what is a Boundary Layer? What is a Monetary Theory? What is a Liquidity Premium? Discussion Comments WiseGeek, in your inbox Our latest articles, guides, and more, delivered daily. Subscribe
liquidity serves as the lifeblood of economic functionality. It represents the ease with which an asset can be converted into cash without causing a significant impact on its price. In simpler terms, liquidity is the ability to access cash quickly without...
Definition of Liquidity Provider A liquidity provider, in the realm of finance, is an individual or entity that plays a fundamental role in maintaining the stability and efficiency of financial markets. Essentially, liquidity providers serve as the cornerstone of market liquidity, ensuring that there ...
A liquidity ratio is a financial ratio that indicates whether a company’s current assets will be sufficient to meet the company’s obligations when they become due. Examples of Liquidity Ratios Typically, the following financial ratios are considered to be liquidity ratios: Current ratio Quick rati...
What is liquidity? Liquidity indicateshow quickly anassetcan be converted into cash. Liquidity is a desirable trait in an investment. In general, the more liquid an asset, the lower the return it offers. Investors bid up its price because they value owning assets that can be quickly converted...
other investors still stick cash under the mattress and would rather forfeit any potential growth out of liquidity protection. By becoming more accepting of risk and not being consumed by risk aversion, investors can more easily come to terms that it is okay to have incurred sunk costs that wil...
to find a similar rate on a new bond—or even one equal to the current market rate when they buy their callable bond—if their bond is called. Callable bonds often have guidelines governing how soon they can be recalled and if the issuer must pay a premium on the principal if they do...
In addition, liquidity as a factor does not yield a significant risk premium beyond that provided by Fama and French's (1993) three factors. Finally, in direct comparisons under a liquidity-augmented two-factor capital asset-pricing model, the liquidity premium is better characterized by a ...