The risk of loss from changes in market prices such as interest rates, exchange rates, equity prices and commodity prices. It is measured on trading and other marked positions.
Where you will meet it
Market risk comes up in 44 learning outcome notes across the FRM syllabus.
A few of them:
Banks FRM Part I · Financial markets and products
“Market risk is loss from moves in interest rates, exchange rates, equity prices or commodity prices on positions.”
The Building Blocks of Risk Management FRM Part I · Foundations of risk management
“Market risk is loss from changes in prices and rates such as equities, interest rates, currencies and commodities.”
Option Sensitivity Measures: The “Greeks” FRM Part I · Valuation and risk models
“The usual mistake is to call a covered call risk free, since covering removes the rally risk, not the market risk.”
Credit Derivatives FRM Part II · Credit risk measurement and management
“It therefore transfers market risk as well as default risk.”
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