What's new

Causes of transactions liquidity risk

Thread starter #1
Malz lists causes of transaction liquidity risk, but I don't see how the factors he listed can affect the ability of buying or selling to move the price.

He lists:

Cost of trade processing
Inventory management by dealers
Adverse selection
Differences of opinion

Picking just one of these - adverse selection - how does a broker not knowing the reasoning behind a trade possible effect the endogenous liquidity?

I've read the source, but just don't see how these tie together.
 
Top