Market risk is present whenever an FI takes an open position in an asset and prices change in a direction opposite to that expected.

Question

Quizplus · Accepted Answer

Market risk, also known as systematic risk, is the risk of losses due to changes in market factors such as interest rates, exchange rates, commodity prices, and equity prices. Whenever an FI takes an open position in an asset, it is exposed to market risk, as the price of the asset may move in a direction opposite to the expected direction, causing losses for the FI. Therefore, the statement is true.

Market Risk Is Present Whenever an FI Takes an Open