# Liquidity premium A fear that the market won’t be there. It is fundamental to understand that the market cannot be assumed. It is not a free good. The price I have to pay for using the market is the liquidity premium. That is why collateralized assets are valued always “at a haircut”. Collateralization is the process by which some asset is pledged as security for the non-performance of a debt contract. In relation to collateralization, *risk* is the real possibility that the value of an asset may change, either up or down, in the future. *Haircut* is the difference between an asset’s present asking price in the market and the price at which it is valued for the purposes of collateralization and in light of its risk; or, in other words, the difference between the price at which it can be currently liquidated and the value at which it can be borrowed against. See Dealer function. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://glossary.ecsa.io/liquidity-premium.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.