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.
Why is market risk a 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.
What is market risk and its types?
The term market risk, also known as systematic risk, refers to the uncertainty associated with any investment decision. The different types of market risks include interest rate risk, commodity risk, currency risk, country risk.
What is market risk and specific risk?
Market risk, or systematic risk, affects a large number of asset classes, whereas specific risk, or unsystematic risk, only affects an industry or particular company.