A type of risk (specifically, a market risk) that arises from inability to find a market for assets (such as securities, commodities, ..) being offered for trading. Investors looking out for potential buyers or sellers in the market for certain assets, and if selling or buying opportunities are not available at the time of need, a market is said to be illiquid. Liquidity risk may also involve different situations where potential losses in the price of assets may be incurred due to the need to buy or sell assets at prices different from market price (usually significantly lower for selling or significantly higher for buying).

Liquidity risk may also be commonplace with the sophisticated investment instruments/ products as the market for such products may be illiquid by nature. It may also be the case with products that are associated with a penalty for early withdrawal or liquidation such as a certificate of deposit (CD).