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4 Types of Market Risk

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Market risk is the potential for price changes in a market to result in investment losses. It is often measured with a concept known as volatility that attempts to predict the potential for price fluctuations of an investment based on its historical price movements. There are several major types of market risk:

1. Equity Risk

The risk associated with stock prices. In many cases, stocks have higher associated risks than other investment classes such as government bonds. Some types of equities such as small cap stocks traded on emerging markets can be extremely volatile.

2. Interest Rate Risk

The risk of unpredictable interest rate changes. The prices of most assets are sensitive to changes in interest rates. For example, the price of fixed interest rate bonds typically declines as interest rates rise.

3. Exchange Rate Risk

Exchange rates can change rapidly as they are affected by a wide range of political and economic conditions. Many businesses have exposure to interest rates both in terms of costs and revenue sources. As a result, changes in exchange rates can lead to volatility in a company's margins and profitability. Exchange rates also directly impact the value of foreign assets such as property.

4. Commodity Risk

The prices of commodities such as grains or fuels can be volatile in the short term. Commodity prices can also follow long cycles meaning that prices can remain elevated or depressed for extended periods of time. As a result, commodity price volatility is a key risk to industries that directly produce commodities or that use them as an input.


This is the complete list of articles we have written about risk.
AI Risk
Risk Avoidance
Brand Risk
Budget Risk
Business Risks
Change Risk
Compliance Risk
Concentration Risk
Cost Risk
Country Risk
Credit Risk
Demand Risk
Dread Risk
Economic Risk
Exchange Rates
Existential Risk
External Risk
Financial Risk
Force Majeure
Good Risk
Human Error
Risk Identification
Infinite Risk
Inflation Risk
Inherent Risk
Interest Rates
Internal Risks
Investing Risk
Legal Risk
Liquidity Risk
Model Risk
Moment Of Risk
Natural Disasters
Negative Risk
Operations Risk
Passive Risk
Personal Risk
Political Risk
Process Risk
Procurement Risk
Product Risk
Project Risk
Pure Risk
Quality Risk
Recession Risk
Risk Mitigation
Refinancing Risk
Regulatory Risk
Reputational Risk
Residual Risk
Resource Risk
Revenue Risk
Risk Appetite
Risk Aversion
Risk Examples
Risk Management
Risk Management Process
Risk Matrix
Risk Meaning
Risk Measurement
Risk Taking
Risk Tolerance
Risk Triggers
Risk vs Issue
Risk vs Opportunity
Risk vs Uncertainty
Risk-Reward Ratio
Seasonal Risk
Secondary Risk
Security Risk
Settlement Risk
Risk Sharing
Speculative Risk
Strategic Risk
Strategy Risk
Supply Risk
Systemic Risk
Tactical Risk
Taxation Risk
Technology Risk
Risk Transfer
Unforced Error
Upside Risk
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