16 07 2011

Liquidity is the ease at which you can trade a particular asset. Liquidity is also determined by market width, which is the cost of executing the transaction of a specified size, and by market depth, which is how much quantity can be executed at a given cost. In markets where securities are relatively illiquid it can arise that the players are willing only to buy or only to sell. Even when two-way quotes exist, the depth could be small. This means not enough orders could be in the system to match a large order.




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