Definition of ‘Liquid Asset’
An asset that can be converted into cash quickly and with minimal impact to the price received. Liquid assets are generally regarded in the same light as cash because their prices are relatively stable when they are sold on the open market.
For an asset to be liquid it needs an established market with enough participants to absorb the selling without materially impacting the price of the asset. There also needs to be a relative ease in the transfer of ownership and the movement of the asset. Liquid assets include most stocks, money market instruments and government bonds. The foreign exchange market is deemed to be the most liquid market in the world because trillions of dollars exchange hands each day, making it impossible for any one individual to influence the exchange rate.