Editing Market liquidity (section)

==Overview==
[[File:Old church building for sale, Widnes.JPG|thumb|231px|This old building for sale in Cheshire, England, has relatively low liquidity. It could be sold in a matter of days at a low price, but it could take several years to find a buyer who is willing to pay a reasonable price.]]
A liquid asset has some or all of the following features: it can be sold rapidly, with minimal loss of value, anytime within market hours. The essential characteristic of a liquid market is that there are always ready and willing buyers and sellers. It is similar to, but distinct from, [[market depth]], which relates to the trade-off between quantity being sold and the price it can be sold for, rather than the liquidity trade-off between speed of sale and the price it can be sold for. A market may be considered both deep and liquid if there are ready and willing buyers and sellers in large quantities.

An illiquid asset is an asset which is not readily salable (without a drastic price reduction, and sometimes not at any price) due to uncertainty about its value or the lack of a market in which it is regularly traded.<ref>{{cite web|url=http://tradelive.in|title=TradeLive|work=TradeLive.in|access-date=27 May 2015|url-status=live|archive-url=https://web.archive.org/web/20171226182409/http://tradelive.in/|archive-date=26 December 2017}}</ref> The mortgage-related assets which resulted in the [[subprime mortgage crisis]] are examples of illiquid assets, as their value was not readily determinable despite being secured by real property. Before the crisis, they had moderate liquidity because it was believed that their value was generally known.<ref name="Langley">{{cite journal |last1=Langley |first1=Paul |title=The Performance of Liquidity in the Subprime Mortgage Crisis |journal=New Political Economy |date=30 March 2010 |volume=15 |issue=1 |page=71-89 |doi=10.1080/13563460903553624|s2cid=153899413 |url=http://dro.dur.ac.uk/11322/1/11322.pdf }}</ref>

[[Speculation|Speculators]] and [[market maker]]s are key contributors to the liquidity of a market or asset. Speculators are individuals or institutions that seek to profit from anticipated increases or decreases in a particular market price. [[Market maker]]s seek to profit by charging for the immediacy of execution: either implicitly by earning a bid/ask spread or explicitly by charging execution commissions. By doing this, they provide the capital needed to facilitate the liquidity. The risk of illiquidity does not apply only to individual investments: whole portfolios are subject to market risk. Financial institutions and asset managers that oversee portfolios are subject to what is called "structural" and "contingent" [[liquidity risk]]. Structural liquidity risk, sometimes called funding liquidity risk, is the risk associated with funding asset portfolios in the [[ordinary course of business|normal course of business]]. Contingent liquidity risk is the risk associated with finding additional funds or replacing maturing liabilities under potential, future-stressed market conditions. When a [[central bank]] tries to influence the liquidity ([[money supply|supply]]) of money, this process is known as [[open market operation]]s.