ERM Glossary: Market risk
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Within the financial community, market risk relates to risks
arising from changes in investment market values of assets. This includes risks
relating to movements in the mark-to-market (or ‘mark-to-model’) values placed
on assets and liabilities which have no quoted market value. Market risk is
generally deemed to include risks relating to changes in interest rates, equity
and property prices and foreign exchange rates.
Some commentators, particularly ones from outside the
financial services industry, use terms such as financial risk
risk to cover aspects of as market risk as defined above. They would then
use the term ‘market risk’ to cover, say, risks relating to changing sales or
margins, or other business activities resulting from changes in the market(s)
in which the business operates.
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