But potentially large liquidity needs require sound liquidity management in order to avoid the risk of forced sales of assets. Setting aside more liquid assets to cover liquidity risks also means fewer funds available to invest countercyclically. Pension funds will then have less flexibility to buy assets traded at distressed price levels.
3  A foreign exchange swap is the simultaneous exchange of one currency for another in the spot market and an agreement to reverse this transaction at a later date at a pre-specified exchange rate.