A 'fire-sale' means that an FI increases its liquidity position by selling part of its assets at the assets' fair market values.

Question

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A fire-sale refers to a situation where an FI sells its assets at significantly discounted prices in order to quickly raise cash to meet liquidity needs. The assets are not sold at their fair market values, but rather at prices that may be below their true worth.

A 'Fire-Sale' Means That an FI Increases Its Liquidity Position