The
Definition Of

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:

More from this Section

  • Shading
    Shading is a request to narrow, or close up, the spread or margin between foreign currency buying and selling rates of exchange.
  • Collusion
    Collusion is a secret agreement between two or more persons to defraud another person of his or her right in order to achieve an unlawful
  • Air Waybill
    Air Waybill or Air Consignment Note is a document which acknowledges receipt by an air transport company of goods dispatched by air.
  • D/A (documents against acceptance)
    D/A (documents against acceptance) refer to shipping documents presented to a bank on a collection basis to be passed to the buyer
  • Currency Call Options
    A Currency call options grants the right to buy a specific currency at a designated price within a specific period of time. The price at which the owner is allowed to buy that currency is known as the exercise price or strike price, and there are monthly expiration dates for each option.
  • Investment Agreement
    An investment agreement spells out specific rights and responsibilities of both the foreign firm and the government. The presence of MNEs is as often sought by ...
  • Forward Exchange Contract (FEC)
    Forward Exchange Contract (FEC) is an agreement entered into between customer and his bank wherein customer agrees to buy or