Definition

Market Risk

The risk incurred by the FIs (Financial institutions) in the trading of assets and liabilities due to changes in interest rates, exchange rates and other assets prices.

Market risk arises when a FI takes a buy or sell position of bonds, equities, commodities or derivatives in the market. Normally in recent times FIs specially banking firms are heavily engaged in the trading of securities in the market. Therefore if the FIs takes buy or sell decision of such assets, the prices of these securities could be affected by the change interest rate.

Share it:  Cite

More from this Section

  • Guaranteed purchase option
    Guaranteed purchase option refers benefit that can be added to a life insurance policy ...
  • Bottom
    Bottom refers to the base support level for market prices of any type. Also used in the ...
  • World Trade Organization (WTO)
    The World trade organization(WTO) was created as a result of the Uruguay Round of trade ...
  • Autocorrelation
    Autocorrelation is the correlation of a variable with itself over successive time intervals. ...
  • No deposit investment products
    No deposit investment products is the bank sales of mutual funds, annuities, and other ...