What is meant by market risk?
Market risk is the risk that arises from movements in stock prices, interest rates, exchange rates, and commodity prices.
What are the 4 types of market risk?
The most common types of market risk include interest rate risk, equity risk, commodity risk, and currency risk.
What type of risk is market risk?
Market risk is the risk of loss due to the factors that affect an entire market or asset class. Market risk is also known as undiversifiable risk because it affects all asset classes and is unpredictable. An investor can only mitigate this type of risk by hedging a portfolio.
Why market risk is so important?
Market risk is something we value and discuss with our clients often. It is important for many reasons other than the obvious – My account is worth less today than it was yesterday. It defines what should or should not be purchased by an investor at any given time and in any given situation.