Market Risk [4]

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Bullet points include: Traditionally handled by modelling short term risk over e.g. 1 day, 5 day, 1 month horizons using statistical models of return volatility. Books of complex exposures decomposed into exposures to notional risk factors, e.g.: Equity spreads, FX rates (equity or currency market risk). Points on government, swap or corporate yield curves (interest rate market risk). Credit spreads (credit market risk, but is this credit risk?). Requires some fundamental axioms. Additivity, scalability and uniqueness of (market / market consistent) values (which in general fall down when markets illiquid)

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