Liquidity Risk and Performance Attribution

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Since the advent of the financial crisis, there has been an increased focus on liquidity in the financial system. When a portfolio manager thinks about liquidity, they often tend to focus on market liquidity because what they are worried about is prices and what happens to prices when they cannot sell their assets as quickly as necessary.

Liquidity Risk and Performance Attribution

Ben Sopranzetti, Ph.D.

Since the advent of the financial crisis, there has been an increased focus on liquidity in the financial system. When a portfolio manager thinks about liquidity, they often tend to focus on market liquidity because what they are worried about is prices and what happens to prices when they cannot sell their assets as quickly as necessary. Market liquidity certainly is important, but it is one of the three factors that work together to ensure liquidity in the financial system.

Liquidity Risk and Performance Attribution

 

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