How can market risk be defined in absolute terms?
A)A dollar exposure amount or as a relative amount against some benchmark.
B)The gap between promised cash flows from loans and securities and realized cash flows.
C)The change in value of an FI's assets and liabilities denominated in nondomestic currencies.
D)The cost incurred by an FI when its technological investments do not produce anticipated cost savings.
E)The capital required to offset a sudden decline in the value of its assets.

Question

Quizplus · Accepted Answer

Market risk can be defined in absolute terms as a dollar exposure amount or as a relative amount against some benchmark. This refers to the potential losses an FI may face due to changes in market conditions such as interest rates, foreign exchange rates, or stock prices. The magnitude of these losses can be measured in dollar terms or as a percentage of the FI's portfolio.

How Can Market Risk Be Defined in Absolute Terms