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. Liquidity

    1. The degree to which an asset or security can be bought or ...
  2. Liquidity Risk

    The risk stemming from the lack of marketability of an investment ...
  3. Maturity

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

    1. A statistical measure of the dispersion of returns for a given ...
  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. Fundamental Analysis

    What is the first day of the first quarter?

    The first day of companies' fiscal years varies based on industry cycles. The timing is especially important because annual reports can have unexpected effects.
  6. Fundamental Analysis

    What is the first day of the second quarter?

    Learn about the fiscal year of different companies and when the second quarter begins. Explore why analysts often prefer to compare results year-over-year.
  7. Fundamental Analysis

    What is the first day of the fourth quarter?

    Learn about different financial years used by various companies. Explore when the fourth quarter begins on October 1st and when it does not.
  8. Fundamental Analysis

    What is a quarterly report?

    Learn about quarterly reports and why they are important to investors. Explore street consensus estimates and how reported results are perceived by investors.
  9. Fundamental Analysis

    What is the first day of the third quarter?

    Learn when the first day of the third quarter begins. Explore how reported financial results may have a profound impact on the price of shares.
  10. Fundamental Analysis

    What is the difference between revenue and profit?

    Understand the difference between revenue and profit, two key concepts in business accounting, including where each can be found on an income statement.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center