The liquidity horizon represents the time required to sell the position or to hedge all material risks covered by the IRC model in a stressed market. The liquidity horizon must be measured under conservative assumptions and should be sufficiently long that the act of selling or hedging, in itself, does not materially affect market prices. The determination of the appropriate liquidity horizon for a position or set of positions may take into account a bank's internal policies relating to, for example, prudent valuation (as per the prudent valuation guidance of Chapter CA-16), valuation adjustments⁸⁹ and the management of stale positions.

⁸⁹ For establishing prudent valuation adjustments, see also Paragraphs CA-8.2.10 to CA-8.2.13.