illiquid

adjective

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il·liq·uid | \ (ˌ)i(l)-ˈlik-wəd

Definition of illiquid

1 : not being cash or readily convertible into cash illiquid holdings

2 : deficient in liquid assets an illiquid bank

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Examples of illiquid in a Sentence

Recent Examples on the Web Almost half of Michigan’s fund is invested in illiquid alternatives such as venture capital and private equity, according to the agenda for the May 16 Michigan Board of Regents posted Monday on the school’s website. — Washington Post, "Michigan Endowment Adds to $340 Million in Overseas Commitments," 20 Sep. 2019 ADS Securities is the only company that H2O has bought illiquid bonds from that Windhorst doesn’t own. — Washington Post, "The Cost of H20’s Misadventures in Illiquidity," 28 Aug. 2019 An illiquid asset cannot easily be sold to meet unexpected spending needs (say, medical expenses) or to take advantage of better investment opportunities. — The Economist, "What is the illiquidity premium?," 7 Nov. 2019 Shares in French bank Natixis SA dropped sharply last week after a Financial Times report highlighted illiquid assets in a fund run by the bank’s H2O Asset Management arm. — Paul J. Davies, WSJ, "The Loan That Fueled a Star Investor’s Risky ‘Illiquid’ Bets," 25 June 2019 Last month, the mainland broker said a hedge fund set up by a subsidiary had racked up a $139 million loss due to choppy and illiquid currency markets. — Mike Bird, WSJ, "BlackRock Spins Beijing’s Revolving Door for New China Chief," 17 Apr. 2019 That Deutsche Bank ended 2018 with a larger stock of Level 3 assets is a sign that the firm is still chasing business in the more complex and illiquid parts of trading. — Washington Post, "Deutsche Bank’s Ills Won’t Be Cured by a Merger," 8 Mar. 2019 That reflects one of the realities of buying emerging markets: indexes can be inefficient, illiquid and dominated by large single stocks, often those embroiled in the country’s political system. — Mike Bird, WSJ, "Vietnam’s Moment Is Here," 28 June 2019 Wall Street firms have long argued that the rule went too far in that effort, limiting activities that are legitimately aimed at facilitating buying and selling illiquid bonds for customers or hedging the bank’s own risk. — Los Angeles Times, "Volcker rule finally gets revised, but Wall Street is different now," 20 Aug. 2019

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'illiquid.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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Last Updated

13 Jan 2020

Cite this Entry

“Illiquid.” The Merriam-Webster.com Dictionary, Merriam-Webster Inc., https://www.merriam-webster.com/dictionary/illiquid. Accessed 26 January 2020.

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More Definitions for illiquid

illiquid

adjective

Financial Definition of illiquid

What It Is

Illiquid describes an asset or security that cannot be sold quickly due to a shortage of interested buyers or a lack of an established trading market. Illiquid assets cannot be easily converted into cash without potential for losing a significant percentage of their value.

How It Works

Examples of illiquid assets include penny stocks, microcap stocks and nanocap stocks; ownership interests in private companies; collectibles like art and antiques; partnership shares in hedge funds and alternative investments; certain types of options, futures and forward contracts; and some types of bonds and debt instruments. Because these assets change hands infrequently, it is difficult for investors to agree on a fair market value. This creates large spreads between the seller’s asking price and the buyer’s offer price.

Liquid markets can become illiquid very quickly. For example, up until 2008, it was not necessarily difficult for a home seller to find a willing buyer, But after the credit crisis began that year, the housing market in much of the U.S. became more and more illiquid.

The most liquid markets are those that continuously have high volumes of buying and selling -- for example, large cap stocks, currencies, treasuries and commodities. Though the balance of buyers and sellers is always shifting, you are almost always guaranteed to find a buyer for these kinds of assets.

Why It Matters

Illiquid assets are considered more risky than liquid assets. During periods of market volatility, when there are fewer buyers than sellers, illiquid assets may become even more difficult to sell. In fact, a seller may find no willing buyers. In these instances, holders of these assets may be required to discount their asking price to attract potential buyers, and in the worst cases may find that their assets have zero value at certain points in time.

Check out similar or related terms: Liquidity Risk, Liquid, Penny Stock

To learn more about illiquid assets, check out: 4 Penny Stock Myths Used to Target the Next Sucker and The Lowdown on Penny Stocks.

Source: Investing Answers