7-83 As commercial banks move from their traditional banking activities of deposit taking and lending and shift more of their activities to trading,they are more subject to

Question

Quizplus · Accepted Answer

Market risk refers to the potential loss that can occur from fluctuations in market conditions, such as changes in interest rates, currency exchange rates, or commodity prices. As commercial banks engage more in trading activities, they become more exposed to market risk. It is not credit risk (which is the risk of borrowers defaulting on loans), political risk (which is the risk of political changes affecting investment), sovereign risk (which is the risk of a government defaulting on its debt), or liquidity risk (which is the risk of not being able to meet short-term obligations).

7-83 as Commercial Banks Move from Their Traditional Banking Activities