Liquid assets

This one is not written up yet

The definition above is the short version. A full explanation — how it works, a worked example and the exam traps — is still being written. In the meantime the chapter below covers it in context.

Written up from the same chapter

• Base Minimum CapitalThe deposit every trading member must keep with the exchange purely to meet contingencies — it earns the member no trading exposure at all, and its size depends on what kind of trading the member does.
• Debt to income ratioMonthly debt servicing commitment divided by monthly income — the ratio that says whether a household's income can carry the loans it already has, let alone another one.
• Emergency fundA pool of money held in liquid assets, sized at six months of household expenses, kept aside so that an interruption in income does not force the sale of long-term investments.
• Expenses ratioAnnual recurring expenses divided by annual income — the share of a household's earnings consumed by regular living costs, and the exact mirror of the savings ratio.
• Extreme Loss MarginA flat 3.5 per cent margin collected on cash-market positions to cover losses falling outside what the VaR margin is designed to capture.
• Impact costThe percentage by which a market order's actual execution price degrades against the ideal price — the mid-point of the best bid and the best offer — and so the real cost of trading in size.