What are the three major types of liquidity shortages?

Answer 1

A liquidity shortage arises when a business or individual is unable to raise cash to meet working capital needs and pay bills. The three major types of liquidity shortages are generally referred to as market liquidity, central bank liquidity, and funding liquidity. Note that an institution or individual can be fundamentally solvent yet still run into major financial problems triggered by the inability to raise cash as needed.
In a market liquidity crisis a holder of fundamentally sound assets such as stocks, bond, or real estate may be unable to raise cash by selling these assets due to adverse market conditions that prevent orderly sales at fair prices. This type of situation can develop during market panics when buyers largely disappear and refuse to buy due to fear or the expectation that tomorrow's price will be much lower.
Central bank liquidity revolves around the amount of financial institution reserves held at the central bank and used in the critical payments system that provides liquidity to the economy. Banks holding excess reserves typically make short term loans through the interbank market to banks that are temporarily short of reserves. During times of financial stress banks with excess reserves will cut back or suspend interbank lending if they suspect that the borrowing counter party bank will be unable to pay back the loan. During periods of time such as this, the central bank in its role of lender as last resort must step in and provide funds to financial institutions in a liquidity crisis. During the financial panic that ensued in the wake of the mortgage market meltdown the central bank lend trillions of dollars to institutions that were unable to raise money anywhere else.
A funding liquidity crisis is linked closely to a market liquidity crisis and arises from the inability to sell assets in an orderly manner without a drastic markdown in price. During times of financial panic the sales price of an asset can drop far below fair value which in turn impairs the financial health of an institution is for accounting reasons the assets held must be market down in value to the current level of distressed pricing. A write down of assets to distressed market level pricing in turn impairs the balance sheet of the firms involved making it very difficult to borrow needed funds and further deepening the liquidity crisis.
When a panic in the bond and stock markets is severe normal lending channels dry up leaving the central bank as the only source of credit for many firms facing a liquidity crisis.

Answer 2

It includes: Market liquidity, Central bank liquidity and Funding liquidity.