Definition for : Liquidity discount

Liquidity discount is a lower valuation applied to illiquid Shares. Lack of liquidity may increase Volatility of the Share price. Therefore Investors will discount (see Discounting) an illiquid Investment at a higher rate than a liquid one. This higher Discounting rate will result in the liquidity discount.
(See Chapters 19 and 32 of the Vernimmen)
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