Trades may be possible mostly at smaller volumes, and large trades almost surely will have greater price effects than normally observed. Other firms also may be trying to liquidate the same positions, creating further demands on diminished market liquidity.
Risk management must take into account the potential for the longer holding periods and more-severe asset price movements likely to be observed in such conditions and the possibility of concentrations of positions in some markets. The challenges posed by tail events are not limited to market liquidity risk. They have broader effects on the measurement and management of market and counterparty credit risk, too.