Define liquidity risk and explain how it relates to bonds and bond yields.

Business

1 answer:

nadya68 [22]2 years ago

5 0

Answer:

Liquidity risk is the inability to quickly sell a bond for its full value. This risk exists primarily in thinly traded issues. Default risk is the likelihood the issuer will default on its bond obligations and is the basis for bond ratings.

Liquidity is a prime determiner of yield spreads, explaining up to half of the cross-sectional variation in spread levels and up to two times the cross-sectional variation in spread changes that is explained by the effects of credit rating alone.

Liquidity risk Liquidity refers to the investor's ability to sell a bond quickly and at an efficient price, as reflected in the bid-ask spread. High-yield bonds can sometimes be less liquid than investment-grade bonds, depending on the issuer and the market conditions at any given time.

(If some parts overlap/relate to the exactly to other parts, I'm sorry. But there ya go !)

You might be interested in

As price falls from Pa to Pb, we could use the three demand curves to calculate three different values of the price elasticity o

elena-s [515]

Answer:

c. 03

Explanation:

3 0

2 years ago

In a marketing communications mix, ________ refers to any short-term incentive that encourages the purchase or sale of a product

Irina-Kira [14]

Answer:

Sales Promotion

Explanation:

Source: Trust me bro

3 0

1 year ago

The staff at a small company includes: 4 secretaries, 20 technicians, 4 engineers, 2 executives, and 50 factory workers. if a pe

lawyer [7]

Total staff = 4 + 20 + 4 + 2 + 50 = 80
P(Factory Worker) = 50/80 = 5/8

Answer: 5/8

8 0

2 years ago

Which one of the following account groups normally has a credit balance? A. equity and assets B. assets and liabilities C. asse

andrezito [222]

Answer:

a) Assets and expenses

Explanation:

Credit balance can be regarded as amount that is been owed by a business to a customer. This occur when the payment by the customer to the business exceed the current invoice stipulates. credit balances can be located or found at right side of a subsidiary ledger account, it can be found on right side of a general ledger account. credit balance that is contained on billing statement of the customers can be regarded as amount that card issuer is owing the customer.

It should be noted that one if account groups that is normally has a credit balance is Assets and expenses

4 0

2 years ago

The determination as to whether an over-the-counter stock is eligible for purchase on margin is made by

astraxan [27]

Answer: Federal Reserve Board

Explanation:

The Federal Reserve Board represents the leadership of the Federal reserve system or the Fed, America's central bank.

Decisions that have to do with the eligibility of an over-the-counter stock for purchase on margin falls under Federal purview and is regulated by the Federal Reserve Board and enforced by the Financial Industry Regulatory Authority.

5 0

2 years ago