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In financial economics, a liquidity crisis is an acute shortage of liquidity. [1] Liquidity may refer to market liquidity (the ease with which an asset can be converted into a liquid medium, e.g. cash), funding liquidity (the ease with which borrowers can obtain external funding), or accounting liquidity (the health of an institution's balance sheet measured in terms of its cash-like assets).
It is debatable whether the hedge was effective from a market risk standpoint, but it was the liquidity crisis caused by staggering margin calls on the futures that forced Metallgesellschaft to unwind the positions. Accordingly, liquidity risk has to be managed in addition to market, credit and other risks.
It attributed deflationary spirals to the reverse effect of a failure of a central bank to support the money supply during a liquidity crunch. [8] In particular, the authors argued that the Great Depression of the 1930s was caused by a massive contraction of the money supply (they deemed it "the Great Contraction " [ 9 ] ), and not by the lack ...
In 2007, the sub-prime crisis caused a widespread liquidity crunch in the CP market. Because SIVs rely on short-dated CP to fund longer-dated assets, they need to roll over their liabilities, just like Banks do. Unlike standard asset backed commercial paper conduits, SIVs do not have liquidity facilities that cover 100% of their outstanding CP.
In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset's price. Liquidity involves the trade-off between the price at which an asset can be sold, and how quickly it can be sold.
JPMorgan expects more consolidation among Gulf companies this year in sectors such as banking, real estate and hospitality, but it sees no liquidity crunch in the region, despite the twin blow of ...
A currency crisis, also called a devaluation crisis, [7] is normally considered as part of a financial crisis. Kaminsky et al. (1998), for instance, define currency crises as occurring when a weighted average of monthly percentage depreciations in the exchange rate and monthly percentage declines in exchange reserves exceeds its mean by more ...
Liquidity regulations are financial regulations designed to ensure that financial institutions (e.g. banks) have the necessary assets on hand in order to prevent liquidity disruptions due to changing market conditions. This is often related to reserve requirement and capital requirement but focuses on the specific liquidity risk of assets that ...