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illiquid

adjective
il·​liq·​uid | \ (ˌ)i(l)-ˈlik-wəd How to pronounce illiquid (audio) \

Definition of illiquid

1 : not being cash or readily convertible into cash illiquid holdings
2 : deficient in liquid assets an illiquid bank
Other Words from illiquid More Example Sentences Learn More about illiquid

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Other Words from illiquid

illiquidity \ (ˌ)i(l)-​ˌli-​ˈkwi-​də-​tē How to pronounce illiquidity (audio) \ noun

Examples of illiquid in a Sentence

Recent Examples on the Web

 That reflects one of the realities of buying emerging markets: indexes can be inefficient, illiquid and dominated by large single stocks, often those embroiled in the country’s political system. — Mike Bird, WSJ, "Vietnam’s Moment Is Here," 28 June 2019 Wall Street firms have long argued that the rule went too far in that effort, limiting activities that are legitimately aimed at facilitating buying and selling illiquid bonds for customers or hedging the bank’s own risk. — Los Angeles Times, "Volcker rule finally gets revised, but Wall Street is different now," 20 Aug. 2019 Such trouble is especially likely with corporate bonds, which are inherently illiquid. — The Economist, "Why everybody is concerned about corporate-bond liquidity," 11 July 2019 When that happens, rates will rise too or the market might become illiquid and bond holders will lose money and can’t sell their debt. — Allison Schrager, Quartz, "Yields are so low that even junk bonds now have negative rates," 18 July 2019 By their nature, such markets are illiquid and more lightly regulated. — The Economist, "The rise and rise of private capital," 4 July 2019 That annoyed investors, but helped ensure the funds are not forced to sell illiquid assets at fire-sale prices. — The Economist, "Another European fund manager runs into concerns over liquidity," 28 June 2019 Vanguard has no illiquid alternatives products to offer these clients now. — Dawn Lim, WSJ, "Indexing Giant Vanguard Examines a Push Into Private Equity," 23 June 2019 What about that illiquid holding that makes up a third of the fund? — Jason Zweig, WSJ, "When Mutual-Fund Values Get Muddy," 14 Dec. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'illiquid.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of illiquid

1913, in the meaning defined at sense 1

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More Definitions for illiquid

illiquid

adjective

Financial Definition of illiquid

What It Is

Illiquid describes an asset or security that cannot be sold quickly due to a shortage of interested buyers or a lack of an established trading market. Illiquid assets cannot be easily converted into cash without potential for losing a significant percentage of their value.

How It Works

Examples of illiquid assets include penny stocks, microcap stocks and nanocap stocks; ownership interests in private companies; collectibles like art and antiques; partnership shares in hedge funds and alternative investments; certain types of options, futures and forward contracts; and some types of bonds and debt instruments. Because these assets change hands infrequently, it is difficult for investors to agree on a fair market value. This creates large spreads between the seller’s asking price and the buyer’s offer price.

Liquid markets can become illiquid very quickly. For example, up until 2008, it was not necessarily difficult for a home seller to find a willing buyer,  But after the credit crisis began that year, the housing market in much of the U.S. became more and more illiquid.

The most liquid markets are those that continuously have high volumes of buying and selling -- for example, large cap stocks, currencies, treasuries and commodities. Though the balance of buyers and sellers is always shifting, you are almost always guaranteed to find a buyer for these kinds of assets.

Why It Matters

Illiquid assets are considered more risky than liquid assets. During periods of market volatility, when there are fewer buyers than sellers, illiquid assets may become even more difficult to sell. In fact, a seller may find no willing buyers. In these instances, holders of these assets may be required to discount their asking price to attract potential buyers, and in the worst cases may find that their assets have zero value at certain points in time.

Check out similar or related terms: Liquidity Risk, Liquid, Penny Stock

To learn more about illiquid assets, check out: 4 Penny Stock Myths Used to Target the Next Sucker and The Lowdown on Penny Stocks.

Source: Investing Answers

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