Likvidisuus

Likvidisuus refers to the ease with which an asset can be converted into cash without significantly affecting its market price. In financial markets, high liquidity means that an asset can be bought or sold quickly in large quantities with minimal impact on its price. Conversely, low liquidity implies that selling a large quantity of the asset might require accepting a lower price, or that it might take a longer time to find a buyer.

Different assets possess varying degrees of liquidity. For instance, cash is the most liquid asset as it is already in its most readily spendable form. Publicly traded stocks and bonds are generally considered liquid, especially those from large, established companies with high trading volumes. However, liquidity can fluctuate depending on market conditions and investor sentiment.

Less liquid assets include real estate, private equity investments, and certain types of collectibles. Selling a property, for example, typically involves a lengthy process and the price may be influenced by the urgency of the sale. Illiquid assets can offer higher potential returns to compensate investors for the difficulty and risk associated with converting them to cash.

Understanding liquidity is crucial for investors, businesses, and financial institutions. For individuals, it relates to their ability to meet short-term financial obligations. For businesses, it's essential for operational continuity and managing debt. In banking, liquidity is a key factor in assessing a bank's stability and its ability to withstand financial shocks. Central banks often monitor and manage liquidity in the broader economy.