kim2_0001732 - Market risk There are three types of market...

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Market risk. There are three types of market risk: current risk, interest rate risk and price risk. a) Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. b) Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. c) Price risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all securities traded in the market. The term ‘market risk’ embodies not only the potential for loss but also the potential
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for gain. Credit risk. The risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Liquid risk ( or funding risk). The risk that an entity will encounter difficulty in raising
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