Liquidity risk involves a kind of systemic failure on the part of the financial institution where it fails to meet expected and unexpected cash flow needs as they emerge from time to time.

Question

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Liquidity risk refers to the risk that a financial institution (or individual) will not be able to meet its financial obligations as they come due because it cannot convert assets to cash without incurring significant losses. This includes both expected and unexpected cash flow needs.

Liquidity Risk Involves a Kind of Systemic Failure on the Part