3 ms·
It think this stretches eventually. I think it as, If the current value of assets is less than current value of liabilities, we have solvency issue. If the curr
by blackoil 4y ago
It think this stretches eventually. I think it as, If the current value of assets is less than current value of liabilities, we have solvency issue. If the current value is higher but will need some time to offload those assets, it is a liquidity issue.
- actionablefiber 4y agoClassically, it’s a liquidity issue if the market value of your bonds goes down because rates went up, causing the discounted present value of the future maturity payout to decrease. It’s a solvency issue if the market value of your bonds went down because your borrowers turned into smoldering craters and they will not ever pay you back 100 cents on the dollar. Really it is not so obvious to discern between them at the moment that the crisis is at its worst.