Explanation:
Transactions liquidity risk (also known as market liquidity risk) is the risk of moving the price of an asset adversely in the act of buying or selling it. This risk is considered low when a market is highly liquid, meaning assets can be bought or sold quickly, cheaply, and without significantly moving the price. Balance sheet risk and funding liquidity risk pertain to an institution's ability to meet its financial obligations and fund its positions, while systemic risk refers to the risk of collapse of an entire financial system or market.
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508.1. Which of the following is "the risk of moving the price of an asset adversely in the act of buying or selling it" such that this risk is "low if assets can be liquidated or a position can be covered quickly, cheaply, and without moving the price too much"?
A
Transactions liquidity risk
B
Balance sheet risk
C
Funding liquidity risk
D
Systemic risk
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