#Liquidity101

Types of Liquidity

1. *Market Liquidity*: The ability to buy or sell an asset in the market without significantly affecting its price.

2. *Funding Liquidity*: The ability to meet financial obligations as they fall due.

Importance of Liquidity

1. *Price Stability*: Liquidity helps maintain price stability, reducing the impact of large trades on market prices.

2. *Market Efficiency*: Liquidity contributes to market efficiency, enabling buyers and sellers to transact quickly and at fair prices.

3. *Risk Management*: Liquidity is essential for risk management, allowing investors to enter or exit positions quickly.