What are Liquid Assets?

Liquid assets are unique type of assets which could be easily converted or exchanged to cash and having little or no effects on the price the asset is being traded in the open markets. Government bonds are typical examples of liquid assets. A liquid asset must have an established market with large base of buyers and sellers where it can be easily and quickly exchanged at normal market without any discount applied. Any asset sold at a discount is referred to as illiquid asset.

Foreign exchange market is the most liquid assets market, where trillions of dollars are moved everyday. It has no room for anybody to manipulate it and this is one of the most important characteristics of a liquid market.