Liquidity

Liquidity refers to the ability of an asset to be quickly and easily converted into cash without a significant loss of value. In financial markets, liquidity also refers to the ease with which securities can be bought or sold at stable prices. Highly liquid assets, such as cash, government bonds, and stocks, can be sold rapidly without a substantial price discount. Low liquidity can result in higher transaction costs and more difficulty in executing trades.

Example

Cash is the most liquid asset because it can be used immediately without needing to be converted. Stocks of large companies are also highly liquid, as they can be sold quickly at market price.