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Liquid asset led premiums vs. Illiquidity return led premiums

Wednesday, March 31, 2010
We simply define liquidity as the ability to take one’s money out of an investment instantaneously without a market impact. That would be the idea of perfect liquidity. So one is able to take their money out of an investment without losing value in.

A SQUARE :: 31Mar10 Liquid asset led premiums vs. Illiquidity return led premiums
Category Risk Management
Author Sona Blessing
- There is a third dimension to liquidity and illiquidity. It's not just the risk and the return, but the certainty of the return.


- There is a potential downside to too much liquidity :


Ucits funds have weekly liquidity, for instance. Well, if I am an investor that stays in the hedge fund, I am not benefiting by other investors coming and going.


- Sorry to say, but there is no such thing as perfect liquidity. There is a spectrum of liquidity
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