In economics and finance, liquidation is procedure of carrying a business to an end and allocating its assets to claimants. The liquidation occur when a company is bankrupt, mean it can’t pay its debts that are due. The operation of business ends and outstanding assets are used to pay shareholders and creditors based on primacy of their rights. The business or industry is no longer in operation once the process of liquidation is completed.
The liquidation also refer to the act of closing one security position and opening a new to offset it. In simple term, it means that closing the existing security position for cash and take an equal but opposite position in the same security.