Liquidity index is a measure of the potential losses an FI could suffer as the result of sudden disposal of assets.

Name: Liquidity index is a measure of the potential losses an FI could suffer as the result of sudden disposal of assets.
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Liquidity index takes into account the ability of an FI to sell assets quickly without significant loss. A higher liquidity index indicates that an FI can sell assets quickly with minimal impact on the market price, and therefore, potential losses can be lower.

Liquidity Index Is a Measure of the Potential Losses an FI