Liquidity premium: myth or reality?
Last updated 20th October 2009 - John Hibbert explores the ongoing debate regarding the existence or otherwise of liquidity premia.
The existence, magnitude, measurability and applicability of liquidity premia are currently the subject of a lively debate among practitioners, accountants, actuaries and regulators. The outcome of the debate will have an impact on the future price of certain financial products and the capital required to support them as well as, arguably, the cost of finance for firms selling illiquid debt through the capital markets.
