Liquidity and Financial Operations

With some preliminary background on liquidity and its associated risks, we are now prepared to review the role of liquidity in financial operations. By examining concepts related to the operating environment we come to understand the importance of liquidity from an internal and systemic perspective, which will be useful when we consider liquidity- induced problems in Part II of the book. In this chapter we explore liquidity operating requirements, the liquidity risk/return trade-off, liquidity characteristics across industries, and endogenous versus exogenous liquidity. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.