Respuesta :
When financial market liquidity abruptly disappears, it is this that causes the majority of financial crises.
What is liquidity black holes?
When market liquidity runs out as a result of herd behaviour, when everyone starts trading on one side and starting to sell, liquidity black holes happen. In typical markets, buyers and sellers can both be found there at the same time. Markets are oversold, everyone wants to sell, and there is a dry up of liquidity when there are liquidity black holes. Trading financial instruments costs money. Trading financial assets is simple and inexpensive when there is market liquidity. Liquidity gaps result in the collapse of asset values, the failure of financial assets, and the complete loss of public confidence in the financial system.
Banks may be required to raise capital if authorities enforce new regulatory standards in response to a rise in volatility. This will drive all of the banks to sell, so reducing their exposure, and all of the banks will engage in similar trading. Some people will need to adopt a contrarian approach and respond in a different way than the majority of people are doing in order to prevent a liquidity crisis.
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