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A simple model that formally defines market liquidity and depth is introduced. Liquidity is the expected rate of order execution in shares per minute. Depth is the density of the limit order book in shares per dollar. Even though the trading and price processes are diffusions the large trader faces a normal inverse Gaussian risk. Illiquid markets tend to exhibit longer execution delays and indirectly higher risk related to price impact. Markets with low depth are characterized by high price sensitivity and larger risks. Deviations from fundamental value exist because arbitraging them away generates risk and negatively skewed profits. I provide analytical computations for liquidity and breadth premia. It is well known that block traders break their orders in an effort to avoid exposing their entire block to the market and thus incurring large price impacts from front-running and liquidity withholding behavior around their block trade. I analytically calculate the benefit of breaking a large block to a series of small orders submitted back-to-back.
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