What should be considered when assessing liquidity risk and how can liquidity risk be defined?
Although a firm may be solvent, Liquidity Risk is the risk that the firm either does not have sufficient available financial resources to enable it to meet its obligations as they fall due. Or it might be that they can secure such resources, but only at an excessive cost.
In the case of UCITs, this is the risk that a position in a UCIT’s portfolio cannot be sold, liquidated or closed out at limited cost in an adequately short timeframe and that the ability of the scheme to comply at any time with the relevant regulations, such as the rules on sale or redemption or the UCITs Directive.
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