The book discusses how market liquidity and liquidity risk affect asset prices and overall market performance. Illiquidity leads to high transaction costs and longer times to trade, which can lower securities prices. Liquidity risk increases when a security becomes harder to trade in the future, raising trading costs. Higher illiquidity and liquidity risk can reduce securities prices and increase expected investor returns. Market liquidity is connected to funding liquidity, which impacts the availability of liquidity services. If liquidity becomes limited, a crisis can occur, causing prices to fall. Liquidity plays a crucial role in determining asset prices.