Liquidity premium

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Revision as of 10:25, 9 October 2013 by imported>Doug Williamson (Category added 9/10/13 and spacing)
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1.

A term used to explain a difference between two types of financial securities, for example stocks, that have all the same qualities except liquidity.


2.

A premium that investors will demand when any given security can not be easily converted into cash, and converted at the fair market value.

When the liquidity premium is high, then the asset is said to be illiquid, which will cause prices to fall, and interest rates to rise.


See also