This working paper surveys theoretical and empirical work about market liquidity and market liquidity risk. It addresses interested practitioners as well as students who want to gain a quick overview about the latest progress in research in market liquidity.

The forecasting uncertainty around point macroeconomic forecasts is usually measured by the historical performance of the forecasting model, using measures such as root mean squared forecasting errors (RMSE). This measure, however, has the major drawback that it is constant over time and hence...