The greater the difference between fair market prices and fire-sale prices for assets, the less liquid the DI's portfolio of assets.

Question

Quizplus · Accepted Answer

Liquidity refers to the ease and speed with which an asset or security can be bought or sold in the market without affecting its price. The greater the difference between fair market prices and fire-sale prices for assets, the harder it is to sell those assets quickly and at a fair price, reducing the liquidity of the DI's portfolio.

The Greater the Difference Between Fair Market Prices and Fire-Sale