Obtaining and Deploying Liquidity - Appendix C (Definitions)

Transcription

1. Shari ’ah Standard No (44): Obtaining and Deploying Liquidity Appendix (C) Definitions Diversification of Liquidity The deployment of liquidity in various instruments; for example, purchasing short-term, medium-term and long-term Sukuk to protect investments from sharp fluctuations in the returns. Liquidity Preference It means to hold on to cash instead of deploying it. That is for the purpose of financing current purchases, or investing it in securities whose prices are expected to decline, or paying for contingent expenses. Liquidity Balance It means reconciling the need to obtain liquidity and the need to deploy it. Liquidity Surplus The availability of liquidity exceeding the institution’s needs. Liquidity Deficit The need for liquidity in order to meet financial requirements. Good Liquidity It is based on two principles: The best price and the shortest period for obtaining it. Liquidity Risk It is the risk of having to sell commodities or securities at a loss in order to procure liquidity. 1095