When troubled financial institutions are forced to sell assets quickly at a deep discount, this is a(n):
A)debt overhang.
B)vicious cycle of deleveraging.
C)maturity transformation.
D)asset bubble.

Question

Quizplus · Accepted Answer

A vicious cycle of deleveraging occurs when financial institutions sell assets quickly at a discount to meet liquidity needs, leading to further declines in asset prices and more selling pressure.

When Troubled Financial Institutions Are Forced to Sell Assets Quickly