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Risks arising from movements in market variables
refer to different aspects of market risk. Nevertheless, the most commonly used types of market risk are: Equity risk, the risk that stock or stock indices
Market_risk
Risk that a borrower or counterparty fails to meet financial obligations
costs. The loss may be complete or partial. In an efficient market, higher levels of credit risk will be associated with higher borrowing costs. Because of
Credit_risk
Estimated potential loss for an investment under a given set of conditions
Value at risk (VaR) is a measure of the risk of loss of investment/capital. It estimates how much a set of investments might lose (with a given probability)
Value_at_risk
Any of various types of risk associated with financing
categories market risk, liquidity risk, credit risk, business risk and investment risk. The four standard market risk factors are equity risk, interest
Financial_risk
Risk of collapse of an entire financial system or entire market
In finance, systemic risk is the risk of collapse of an entire financial system or entire market, as opposed to the risk associated with any one individual
Systemic_risk
Economic theory that asset prices fully reflect all available information
implication is that it is impossible to "beat the market" consistently on a risk-adjusted basis since market prices should only react to new information. Because
Efficient-market_hypothesis
Measure of excess
that the market premium is dynamic in nature and ever-changing. Additionally, a general observation regardless of application is that the risk premium
Risk_premium
Type of financial risk
of market risk. This can be accounted for by: Widening bid–ask spread Making explicit liquidity reserves Lengthening holding period for value at risk (VaR)
Liquidity_risk
Protecting economic value by managing risk exposure
Financial risk management is the practice of protecting economic value in a firm by managing exposure to financial risk - principally credit risk and market risk
Financial_risk_management
Risk of disrupting business operations
I, operational risk was negatively defined: namely that operational risk are all risks which are not market risk and not credit risk. Some banks have
Operational_risk
Risk measure estimating the average loss in the worst tail of the distribution
shortfall (ES) is a risk measure—a concept used in the field of financial risk measurement to evaluate the market risk or credit risk of a portfolio. The
Expected_shortfall
Possibility of something bad happening
Iqbal (2008). "Market Risk, Interest Rate Risk, and Interdependencies in Insurer Stock Returns: A System-GARCH Model". The Journal of Risk and Insurance
Risk
Place where stocks are traded
stock market crashes and bear markets List of stock exchanges List of stock market indices Modeling and analysis of financial markets Financial risk management
Stock_market
Generic term for all markets in which trading takes place with capital
markets, which provide short term debt financing and investment. Derivatives markets, which provide instruments for the management of financial risk.
Financial_market
Financial investment strategy
portfolio is considered market-neutral if it seeks to avoid some form of market risk entirely, typically by hedging. To evaluate market neutrality requires
Market_neutral
Financial institution that accepts deposits
the market risk factors. Operational risk: risk arising from the execution of a company's business functions. Reputational risk: a type of risk related
Bank
Australian treasury management company
The company provides treasury and risk management software and specialises in market risk management. Visual Risk was one of Australia's original Fintech
Visual_Risk
Representation of the capital asset pricing model
non-diversifiable risk. The risk of an individual risky security reflects the volatility of the return from the security rather than the return of the market portfolio
Security_market_line
Banking regulation framework
eliminated. The risk coverage of the capital framework was strengthened. Promoted more integrated management of market and counterparty credit risk Added the
Basel_III
Expected change in price of a stock relative to the whole market
refers to an asset's non-diversifiable risk, systematic risk, or market risk. Beta is not a measure of idiosyncratic risk. Beta is the hedge ratio of an investment
Beta_(finance)
British financial mathematician
her research on financial markets, derivatives, and risk management. She is the author of the four-volume textbook Market Risk Analysis (2008), which is
Carol_Alexander
Finance model linking expected return to systematic risk
account the asset's sensitivity to non-diversifiable risk (also known as systematic risk or market risk), often represented by the quantity beta (β) in the
Capital_asset_pricing_model
Stock market risk measure
The ulcer index is a stock market risk measure or technical analysis indicator devised by Peter Martin in 1987, and published by him and Byron McCann
Ulcer_index
Cost of a company's funds
a return that is the risk-free return plus the security's sensitivity to market risk (β) times the market risk premium. The risk premium varies over time
Cost_of_capital
International financial regulatory body
a framework for market risk, which included both a standardised approach and a modelled approach, the latter based on value at risk. The Basel Core Principles
Basel Committee on Banking Supervision
Basel_Committee_on_Banking_Supervision
Banking regulation framework
calculated for three major components of risk that a bank faces: credit risk, operational risk, and market risk. Other risks are not considered fully quantifiable
Basel_II
Finance property of an asset
return. In addition, risk-averse investors require higher expected return if the asset's market-liquidity risk is greater. This risk involves the exposure
Market_liquidity
Risk of statistically extreme events
tail risk when market data exhibit fat tails, thus understating asset prices, stock returns and subsequent risk management strategies. Tail risk is sometimes
Tail_risk
Risk class in finance
which the same instrument is revealed to have traded in the market". However, model risk is increasingly relevant in contexts other than financial securities
Model_risk
Vulnerability to significant events that affect aggregate outcomes
aggregate risk. Systematic or aggregate risk arises from market structure or dynamics which produce shocks or uncertainty faced by all agents in the market; such
Systematic_risk
Risk of investing or lending in a country
Emerging Markets Index (MSCI) (for the equity risk premium of a country stock market) Emerging Market Bond Index (EMBI) (for the debt risk premium of
Country_risk
CPSS-IOSCO Principles for Financial Market Infrastructures (PFMIs) are a set of principles to manage market risk that were published in 2012 by the Committee
CPSS-IOSCO Principles for Financial Market Infrastructures
CPSS-IOSCO_Principles_for_Financial_Market_Infrastructures
Estimate of the potential impact of market movements on a firm's earnings
Earnings at risk (EaR) and the related cash flow at risk (CFaR) are measures reflecting the potential impact of market risk on the income statement and
Earnings_at_risk
Classification of a startup company
investment before successful commercialization. Their primary risk is technical risk, while market risk is often significantly lower due to the clear potential
Deep_tech
Global banking standard
approach for counterparty credit risk (SA-CCR) is the capital requirement framework under Basel III addressing counterparty risk for derivative trades. It was
Standardized approach (counterparty credit risk)
Standardized_approach_(counterparty_credit_risk)
Financial markets term
some risk in return for the chance of a small profit. On the LSE, one can always buy and sell stock: each stock always has at least two market makers
Market_maker
Financial loss due to interest rate changes
rate risk refers to the potential for financial loss due to fluctuations in interest rates. It will, in turn, impact differently re market risk, i.e.
Interest_rate_risk
Financial market where participants can issue new debt or buy and sell debt securities
The bond market (also debt market or credit market) is a financial market in which participants can issue new debt, known as the primary market, or buy
Bond_market
Type of financial market providing short-term funds
credit risks, and structures. A market can be described as a money market if it is composed of highly liquid, short-term assets. Money market funds typically
Money_market
Financial market for derivatives
order to hedge the risks incurred by transacting with customers, dealers turn to the interdealer market, or the exchange-traded markets. Dealers can also
Derivatives_market
Type of financial risk
Foreign exchange risk (also known as FX risk, exchange rate risk or currency risk) is a financial risk that exists when a financial transaction is denominated
Foreign_exchange_risk
Measure of financial risk
investment that has no risk that can be diversified (e.g., Treasury bills or a completely diversified portfolio), per unit of market risk assumed. The Treynor
Treynor_ratio
Academic discipline studying businesses and investments
value and minimize loss. In practice, risks are always present in any financial action and entities. Financial markets and institutions underpin the system
Finance
Investment strategy
the returns to risk arbitrage are somewhat uncorrelated to the returns of the stock market in typical market environments. However, risk arbitrage is not
Risk_arbitrage
Business methods and processes
Commission Cost risk Credit risk Financial risk management § Corporate finance Information Quality Management ISO 31000 Market risk and strategic planning
Enterprise_risk_management
American lawyer and government official
to market integrity, risk management, and financial stability. He became well known for his advocacy on addressing climate-related financial risks in
Rostin_Behnam
Trading done directly between two parties
parties), and each party could have credit risk concerns with respect to the other party. The OTC derivative market is significant in some asset classes: interest
Over-the-counter_(finance)
Capitalisation of risk-free opportunities in financial markets
ignores the cost of transport, storage, risk, and other factors. "True" arbitrage requires that there is no market risk involved. Where securities are traded
Arbitrage
Risk from commodity price fluctuations
Commodity risk refers to the uncertainties of future market values and of the size of the future income, caused by the fluctuation in the prices of commodities
Commodity_risk
Risk that a hedge and its underlying asset do not move perfectly together
actual available spot rate on the market on fixing date. Over-the-counter (OTC) derivatives can help minimize basis risk by creating a perfect hedge. This
Basis_risk
Concept in finance
In finance, risk factors are the building blocks of investing that help explain systematic returns in the equity market and the possibility of losing
Risk_factor_(finance)
Accounting standard titled "Financial Instruments: Disclosures"
income or within the notes. The nature and extent of risks (credit risk, liquidity risk, market risk) faced by the entity due to the financial instruments
IFRS_7
Financial service providing capital-raising and advisory functions
'control' banking functions from taking too much risk. "Market Risk" is the control function for the Markets' business and conducts review of sales and trading
Investment_banking
Form of financial risk primarily associated with fixed income securities
securities. Reinvestment risk and interest rate risk have offsetting effects: higher market rates decrease the market value of the bond, but increase the interest
Reinvestment_risk
Risk arising from changes in market volatility affecting the value of financial positions
Financial risk management Implied volatility Volatility smile IVX Market risk Model risk § Uncertainty on volatility Volatility arbitrage Value at risk Volatility
Volatility_risk
Investment position used to offset potential losses in another asset
taking a position in one market to offset and balance against the risk adopted by assuming a position in a contrary or opposing market or investment. The word
Hedge_(finance)
Standardised contract to buy or sell an asset at a future date
spot market. A stock future is a cash-settled futures contract on the value of a particular stock market index. Stock futures are one of the high risk trading
Futures_contract
Identification, evaluation and control of risks
probability of those risks occurring. Risks can come from various sources (i.e., threats), including uncertainty in international markets, political instability
Risk_management
securities tied to interest rates -- especially, bonds and market securities. Repricing risk is presented by assets and liabilities that reprice at different
Repricing_risk
Privately pooled investment fund using diverse strategies to seek high returns
of complex trading and risk management techniques to aim to improve investment performance and insulate returns from market risk. Among these portfolio
Hedge_fund
Strategies used to reduce financial exposure to fuel-price volatility
building. Commodity markets Commodity risk Energy derivative Liquidity risk Market risk Risk modeling "Committee Draft of ISO 31000 Risk management" (PDF)
Fuel_price_risk_management
Modelling financial risks
Financial risk modeling is the use of formal mathematical and econometric techniques to measure, monitor and control the market risk, credit risk, and operational
Financial_risk_modeling
Exercising systematic anticipatory thinking skills
factors; or external events. Unlike other type of risks (market risk, credit risk, etc.) operational risk had rarely been considered strategically significant
Operational_risk_management
Insurance purchased by an insurance company
expand cedent market share or limit their risk. Reinsurance developed alongside marine insurance, where underwriters sought to share the risks of long-distance
Reinsurance
Type of operational risk
Categories of Financial Risk for a Company?". Investopedia. Retrieved 2021-08-01. Roger McCormick. "Legal Risk in the Financial Markets", Oxford University
Legal_risk
Trading strategy
demands good position sizing, market timing, and decision making skill. Although the strategy does not have much downside risk, there is a scarcity of opportunities
Pairs_trade
Person who trades stocks
and $900,000 on average. Commodities exchange Commodity market Derivatives market Financial risk management § Investment management List of commodity traders
Trader_(finance)
is a certain financial risk that the provider produces too little energy and thus has to buy the remaining power from a market opponent for a high spot
Shape_risk
Stock trading outside of trading hours
pre-market trading or after-hours trading. After-hours trading is the buying and selling of securities when the major markets are closed. Market makers
Extended-hours_trading
Bond issued by a government
US Treasury. Bond market Foreign-exchange reserves of China Government debt Quantitative easing List of government bonds Market risk Municipal bond Treasury
Government_bond
Electronic financial trading price and related data
calculate market risk on portfolios of investments that may be held by an individual or an institutional investor. A typical equity market data message
Market_data
Linear interest rate derivative involving exchange of interest rates between two parties
categories of financial risk: predominantly market risk - specifically interest rate risk - and credit risk. Reputation risks also exist. The mis-selling
Interest_rate_swap
basic financial market participant distinctions, investors versus speculators and institutional versus retail. Action in financial markets by central banks
Financial_market_participants
Risk that financial assets are misstated due to uncertain or unreliable valuations
liability (the so-called "exit price"). This risk is especially significant for financial assets and related marketable contracts with complex features and limited
Valuation_risk
Financial contract which transfers an underlying asset's credit and market risks
equity swap is a financial contract that transfers both the credit risk and market risk of an underlying asset. A swap agreement in which one party makes
Total_return_swap
Mathematical framework for investment risk
unique, unsystematic, or idiosyncratic risk. Systematic risk (a.k.a. portfolio risk or market risk) refers to the risk common to all securities—except for
Modern_portfolio_theory
Equity risk is "the financial risk involved in holding equity in a particular investment." Equity risk is a type of market risk that applies to investing
Equity_risk
Type of financial contract
measurable outcomes rather than directly on market prices. Agricultural and energy companies use derivatives to hedge risks such as weather conditions and commodity
Derivative_(finance)
Global decentralized trading of international currencies
exchange market (forex, FX, or currency market) is a global decentralized or over-the-counter (OTC) market for the trading of currencies. This market determines
Foreign_exchange_market
Risk that changes in transaction or production volumes will affect financial outcomes
changes in supply and demand often result in market volatility. Producers here are relatedly subject to price risk, although in a narrower sense than usually
Volume_risk
Market in issued financial instruments
The secondary market, also called the aftermarket, is the financial market in which previously issued financial instruments such as shares, bonds, options
Secondary_market
World's largest investment banks
provide both advisory and financing banking services, as well as the sales, market making, and research on a broad array of financial products including equities
Bulge_bracket
Mathematical model of interest rates
one source of market risk. The model can be used in the valuation of interest rate derivatives, and has also been adapted for credit markets. It was introduced
Vasicek_model
above the risk-free rate. Asset allocation Capital market line Capital allocation line Security market line Security characteristic line "Market Portfolio
Market_portfolio
American capital markets analytics and risk technology company
American capital markets analytics and risk management technology company headquartered in New York City. It develops pricing, risk management, and portfolio
Numerix
Deposit account that pays interest
A money market account (MMA) or money market deposit account (MMDA) is a deposit account that pays interest based on current interest rates in the money
Money_market_account
Scam on the Bombay Stock Exchange
The 1992 Indian stock market scam was a market manipulation carried out by Harshad Mehta with other bankers and politicians on the Bombay Stock Exchange
1992_Indian_stock_market_scam
Uncertainty in profitability and operations
stock-market jumps and high stock-market volatility than Spanish Flu developments did a century earlier. Jolly, Adam (2003). Managing Business Risk: A Practical
Business_risks
SIP investment
mitigates the risk of investing a large sum at a market peak. This strategy frees the investor from the challenge of trying to time the market. The Power
Systematic_investment_plan
Type of financial market
The spot market or cash market is a public financial market in which financial instruments or commodities are traded for immediate delivery. It contrasts
Spot_market
Market for the sale of securities or bonds collateralized by the value of mortgage loans
than the old localized market for funds which might have a shortage or surplus depending on the location. In theory, the risk of default on individual
Secondary_mortgage_market
Regulatory rating system to classify a bank's soundness
asset liability management) Sensitivity (sensitivity to market risk, especially interest rate risk) Ratings are from 1 (best) to 5 (worst) in each of the
CAMELS_rating_system
Association of Risk Professionals (GARP). He is currently on the Board of the Nine Dots Prize. Previously, he was global head of market risk and global head
Riccardo_Rebonato
Framework for managing risks arising from mismatches between assets and liabilities
techniques used by a bank or other corporate to minimise exposure to market risk and liquidity risk through holding the optimum combination of assets and liabilities
Asset and liability management
Asset_and_liability_management
Form of financial derivative
platforms due to their high risk. At the same time, a number of trading apps with various usage scenarios operate on the market, including eToro, Freetrade
Contract_for_difference
Sudden collapse of asset values which generates a credit or business cycle
gains encourage a diminished perception of overall market risk, which promotes the leveraged risk of investing borrowed money instead of cash. The debt-leveraged
Minsky_moment
Short-rate model describing the evolution of interest rates
it describes interest rate movements as driven by only one source of market risk. As a stochastic asset model, it can be used in the valuation of interest
Rendleman–Bartter_model
Stochastic model for the evolution of financial interest rates
it describes interest rate movements as driven by only one source of market risk. The model can be used in the valuation of interest rate derivatives
Cox–Ingersoll–Ross_model
Probability of adverse effects of political decisions
frontier markets such as Africa. iStrategic LLC is focused on the Middle East and North Africa. Micro-level political risks are project-specific risks. In
Political_risk
Framework for corporate funding, capital structure, and investments
banking. Financial risk management, generally, is focused on measuring and managing market risk, credit risk and operational risk. Within corporates (i
Corporate_finance
travel, tourism, insurance
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