The risks arising from financial instruments are typically:
A) credit risk, fair value risk and market risk.
B) credit risk, liquidity risk and financial risk.
C) inherent risk, liquidity risk and market risk.
D) credit risk, liquidity risk and market risk.

Question

Quizplus · Accepted Answer

Credit risk refers to the risk of default by the counterparty to a financial instrument, liquidity risk refers to the risk of not being able to buy or sell the financial instrument quickly and at a fair price and market risk refers to the risk of changes in market conditions affecting the value of the financial instrument. Therefore, the risks arising from financial instruments are typically credit risk, liquidity risk, and market risk, which are all covered in option D.

The Risks Arising from Financial Instruments Are Typically