Asset liquidity risk is most pronounced for which of the following? A. A $100m position in Treasury bonds. B. A $10m position in Treasury bonds. C. A $10m position in distressed securities. D. A $100m position in distressed securities.
Asset liquidity risk is a function of the size of the position and the intrinsic liquidity of the instrument. Distressed securities are less liquid than Treasuries and a $100m position is more illiquid than a $10m position.
