A thinly traded asset is an asset/ investment for which there is no liquid market (typically, a liquid public market) available. Holders of illiquid or thinly traded assets may not be able to sell such assets in the market for extended periods—if ever. Trading of such assets is by nature complex, fragmented and infrequent.
Given the high illiquidity thinly-traded assets feature, investors may only be able to sell in the over-the-counter market- which is naturally a set up for infrequent privately negotiated transactions. Not surprisingly, sales of thinly traded assets typically take place at below-market prices- usually prices far lower than would be otherwise if there were a liquid public market.
The main examples of thinly traded assets include:
- Silver.
- Land.
- Corporate bonds.
- Micro-cap stocks.
- Certain types of asset-backed securities (ABSs).
- Structured product tranches.
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