Market risk

Market risk - this is an existing or potential risk to earnings and capital, which arises due to adverse fluctuations in the value of the securities and commodities and foreign exchange rates for the instruments that are in the trading book. This risk arises from marketmeykerstva (activities of a professional market participant (or the stock exchange), which is to provide a permanent price quotations are the buyer and seller of financial instruments on its own behalf or on behalf of the client), dealing (transactions of purchase and sale, the bank carries on its own name but on behalf and for clients' funds), the adoption of positions on debt and equity securities, currencies, commodities and derivative instruments (derivatives). Currency risk - this is an existing or potential risk to earnings and capital, which is due to adverse fluctuations in foreign exchange rates and prices for precious metals. It can be divided into such risks, the risk of the transaction, the risk allocation from one currency to another (translation risk), economic exchange rate risk. Transaction risk is that adverse fluctuations in foreign exchange rates affect the real value of open currency positions. However, since it usually follows the operations marketmeykerstva, dealing and taking positions in foreign currencies, the risk is considered in the recommendations for market risk. Risk allocation from one currency to another (translation risk) is that the value of equivalent currency position reporting changes as a result of changes in exchange rates used to convert balances in foreign currencies in the base (national) currency. Category: Risks in Banking