Liquidity Gap

AAA

DEFINITION of 'Liquidity Gap'

The difference between a firm's assets and a firm's liabilities, caused by said assets and liabilities not sharing the same properties. This gap can be positive or negative, depending on if the firm has more assets than liabilities or vice versa.

INVESTOPEDIA EXPLAINS 'Liquidity Gap'

For banks, the liquidity gap can change over the course of the day as deposits and withdrawals are made. This means that the liquidity gap is more of a quick snapshot of a firm's risk, rather than a figure that can be worked over for a long period of time. To compare periods of time banks, calculate the marginal gap, which is the difference between gaps of different periods.

RELATED TERMS
  1. Maturity

    The period of time for which a financial instrument remains outstanding. ...
  2. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
  3. Liquidity Risk

    The risk stemming from the lack of marketability of an investment ...
  4. Liquidity

    1. The degree to which an asset or security can be bought or ...
  5. Occupational Safety And Health ...

    Law passed in 1970 to encourage safer workplace conditions in ...
  6. Administrative Order On Consent ...

    An agreement between an individual or business and a regulatory ...
Related Articles
  1. Mutual Funds & ETFs

    The Risks Of Real Estate Sector Funds

    Discover the risks and rewards of investing in real estate funds, as well as some of the best and worst performers.
  2. Mutual Funds & ETFs

    Evaluating Bond Funds: Keeping It Simple

    Discover some of the key factors for determining a fund's risk-return profile.
  3. Active Trading

    Should You Be Afraid Of Dark Pool Liquidity?

    Don't fear the deep end. Dark pool liquidity can help drive down stock cost for everyday investors.
  4. Options & Futures

    Principal-Protected Investments: Risks, Fees And Regulations

    Discover if these instruments hit the right note for you.
  5. Investing Basics

    What are Financial Statements?

    Financial statements are a picture of a company’s financial health for a given period of time at a given point in time. The statements provide a collection of data about a company’s financial ...
  6. Investing

    What does Large Cap mean?

    The “cap” in large cap refers to a company’s capitalization as determined by the total market value of its publicly traded shares. Large cap is short for “large market capitalization.”
  7. Investing

    The Production Possibility Frontier (PPF)

    A production possibility frontier (PPF) is a range of answers to the question, “What is our maximum production capacity?”
  8. Investing

    What's a Debit Note?

    A debit note is a document used by a seller to inform a purchaser of a dollar amount owed. As the name indicates, it is a note from the seller that a debit has been made to the purchaser’s account. ...
  9. Professionals

    What does C-Suite Mean?

    C-Suite is a slang term used to describe the highest level senior executives of a corporation. This is the decision-making, power center of a company. These individuals are usually paid well, ...
  10. Investing

    What's a Monopolistic Market?

    A monopolistic market has a significant number of characteristics of a pure monopoly. Though there may be more than one supplier, the market has high prices, suppliers tightly control availability ...

You May Also Like

Hot Definitions
  1. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  2. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  3. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  6. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
Trading Center