Market Risk
What is market risk?
Market risk is the risk of incurring losses due to movements in prices across a market. The type of market risk depends on the type of investment, for example equity risk is the risk of incurring such losses on stock, while currency risk is the risk of losing money on foreign exchange rate changes.
Where have you heard about market risk?
You may have heard about market risk in connection with certain market movements. For example, inflation in the Japanese economy is considered to have increased the market risk.
What you need to know about market risk...
Market risk can be affected by developments outside of the markets. For example, presidential elections can be a factor that affects market risk, as demonstrated by the 2016 US presidential election: .
In the US, the Securities and Exchange Commission requires companies to dedicate a section to their current market risk in their annual reports. In this section, the company must explain how its own results can depend on the financial markets.