Market risk is defined as the risk related to the uncertainty of an FI's:
A)earnings on its trading portfolio caused by changes in market conditions
B)reputation caused by changes in market conditions
C)solvency caused by the default by specific markets (industries)
D)funding capacity in money markets or in capital markets

Question

Quizplus · Accepted Answer

Market risk refers to the risk of potential losses resulting from changes in market conditions, such as interest rate fluctuations, exchange rate movements, and changes in commodity prices. This risk is generally associated with the trading portfolio where the FI holds financial instruments for the purposes of trading or resale rather than for long-term investment. Therefore, the best choice is (A) earnings on its trading portfolio caused by changes in market conditions.

Market Risk Is Defined as the Risk Related to the Uncertainty