Liquidity Risk
Liquidity risk is the chance a company can’t meet its debt obligations due to insufficient cash or liquid assets. It also applies to financial instruments—like equity shares or commodity futures—indicating difficulty in buying or selling them without impacting price, due to low market activity. For companies, it signals potential financial distress; for securities, it reflects trading challenges. High liquidity risk means greater uncertainty in accessing funds or exiting positions, affecting stability and investor confidence in both corporate and market contexts.
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