Ch.10 · Risk Measures and Ratios · easy
What is 'liquidity risk' in mutual funds?
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EXPLANATION
Liquidity risk is the inability to sell a security at or near its fair market value quickly. This is particularly relevant for small/mid cap equities and lower-rated bonds with thin trading volumes. During market stress, even typically liquid securities can become illiquid, forcing fund managers to sell at steep discounts, hurting NAV.
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