In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset's price. Liquidity involves the trade-off between the price at which an asset can be sold, and how quickly it can be sold. In a liquid market, the trade-off is mild: one can sell quickly without having to accept a significantly lower price. In a relatively illiquid market, an asset must be discounted in order to sell quickly. Money, or cash, is the most liquid asset because it can be exchanged for goods and services instantly at face value.
This old building for sale in Cheshire, England, has relatively low liquidity. It could be sold in a matter of days at a low price, but it could take several years to find a buyer who is willing to pay a reasonable price.
Stock exchanges promote liquidity by accepting competitive bids from buyers. (Toronto Stock Exchange, 1910)
The American subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis. The crisis led to a severe economic recession, with millions of people losing their jobs and many businesses going bankrupt. The U.S. government intervened with a series of measures to stabilize the financial system, including the Troubled Asset Relief Program (TARP) and the American Recovery and Reinvestment Act (ARRA).
A continuous buildup of toxic assets in the form of subprime mortgages purchased by Lehman Brothers ultimately led to the firm's bankruptcy in September 2008. The collapse of Lehman Brothers is often cited as both the culmination of the subprime mortgage crisis, and the catalyst for the Great Recession in the United States.
President George W. Bush discusses education, entrepreneurship and home ownership at the Indiana Black Expo in 2005.
Federal funds rate history and recessions
A mortgage brokerage in the US advertising subprime mortgages in July 2008