What is a significant characteristic of liquidity risk?

Liquidity risk is primarily characterized by the difficulty of quickly buying or selling assets in the market without significantly affecting their price. The correct answer reflects this characteristic, highlighting that liquidity risk arises when there are not enough buyers or sellers in the market. This lack of market participants creates a situation where it may not be possible to liquidate contracts promptly or at favorable prices, leading to potential losses or difficulties in meeting financial obligations.

In contrast, certainty of funding sources pertains more to solvency and financial stability rather than liquidity. Rapid price changes relate more to market volatility than to liquidity itself. The need for collateral in transactions can be a factor in some financial dealings, but it does not directly define liquidity risk as a characteristic. Thus, the defining feature of liquidity risk is indeed the lack of buyers or sellers to facilitate the quick liquidation of positions.