Liquidity Premium Theory

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Definition: Liquidity Premium Theory

Liquidity Premium Theory
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Full Definition of Liquidity Premium Theory

Suggests that since investors are risk averse, they will demand a greater premium for securities with longer maturity periods as these are not easily convertible to cash on short notice. A liquidity premium is usually added to the equilibrium interest rate to determine the market rate of securities.

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April 20, 2024 https://payrollheaven.com/define/liquidity-premium-theory/.
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Liquidity Premium Theory. PayrollHeaven.com. Payroll & Accounting Heaven Ltd.
https://payrollheaven.com/define/liquidity-premium-theory/ (accessed: April 20, 2024).
American Psychological Association (APA):
Liquidity Premium Theory. PayrollHeaven.com. Retrieved April 20, 2024
, from PayrollHeaven.com website: https://payrollheaven.com/define/liquidity-premium-theory/

Definition Sources

Definitions for Liquidity Premium Theory are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 20th November, 2021 | 0 Views.