Liquidity risk is related to default risk because ________________________.

Name: Liquidity risk is related to default risk because ________________________.
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The Answer is If a sudden need for liquidity forces you to sell illiquid assets quickly, the value realized may be so low that it can impair solvency, so liquidity risk can trigger default risk.Also, unexpectedly high defaults can raise concerns about insolvency, causing funding to dry up.So default risk can create liquidity risk.

Liquidity Risk Is Related to Default Risk Because ________________________