MANAGEMENT

Detailed explanation-1: -Risk stating assets are sold at low prices because of sudden surge in withdrawals of liabilities is classified as liquidity risk. Liquidity is the ability of a firm, company, or even an individual to pay its debts without suffering catastrophic losses.

Detailed explanation-2: -It basically describes how quickly something can be converted to cash. There are two different types of liquidity risk. The first is funding liquidity or cash flow risk, while the second is market liquidity risk, also referred to as asset/product risk.

Detailed explanation-3: -Liquidity risk is defined as the risk of incurring losses resulting from the inability to meet payment obligations in a timely manner when they become due or from being unable to do so at a sustainable cost.

Detailed explanation-4: -Liquidity risk occurs when an individual investor, business, or financial institution cannot meet its short-term debt obligations. The investor or entity might be unable to convert an asset into cash without giving up capital and income due to a lack of buyers or an inefficient market.

Detailed explanation-5: -An example of liquidity risk would be when a company has assets in excess of its debts but cannot easily convert those assets to cash and cannot pay its debts because it does not have sufficient current assets. Another example would be when an asset is illiquid and must be sold at a price below the market price.