how does liquidity risk relate to market risk and credit risk 
liquidity risk market risk and credit risk are distinct types of financial risks but they are interrelated market risk pertains to the fluctuations in asset prices due to changes in market conditions credit risk involves the potential loss from a borrower s failure to repay a loan or meet contractual obligations liquidity risk might exacerbate market risk and credit risk for instance a company facing liquidity issues might sell assets in a declining market incurring losses market risk or might default on its obligations credit risk can liquidity risk affect the broader economy absolutely liquidity risk can have ripple effects across the broader economy for instance during a financial crisis liquidity issues in major financial institutions can lead to a credit crunch where lending becomes restricted thereby impacting businesses consumers and overall economic growth similarly liquidity problems in large corporations can result in job losses reduced consumer spending and a decline in investor confidence 6