liquidity risk

Liquidity risk refers to the possibility that an individual or business may not be able to quickly convert an asset into cash without significantly lowering its price. This can occur if there are not enough buyers in the market or if the asset is inherently hard to sell. For example, if someone owns a house and needs cash urgently, selling the house might take time, leading to financial strain. In financial markets, liquidity risk can affect investors and companies, as it may hinder their ability to respond quickly to financial needs or opportunities.