FRM Financial Risk Manager Practice Test

The house is an illiquid asset. It cannot easily be sold or exchanged for cash without a substantial loss in value.

Key Takeaway: Liquidity refers to the easiness with which an asset or security can be bought or sold in the market without affecting the asset's price. It is safer to invest in liquid assets than in illiquid ones because it is easier for an investor to get the liquid assets converted into cash.