Market risk

Market risk is the risk of losses in positions arising from movements in market variables like prices and volatility. There is no unique classification as each classification may 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 (e.g. Euro Stoxx 50, etc.) prices or their implied volatility will change.
• Interest rate risk, the risk that interest rates (e.g. Libor, Euribor, etc.) or their implied volatility will change.
• Currency risk, the risk that foreign exchange rates (e.g. EUR/USD, EUR/GBP, etc.) or their implied volatility will change.
• Commodity risk, the risk that commodity prices (e.g. corn, crude oil) or their implied volatility will change.
• Margining risk results from uncertain future cash outflows due to margin calls covering adverse value changes of a given position.
• Shape risk
• Holding period risk
• Basis risk

The capital requirement for market risk is addressed under a revised framework known as "Fundamental Review of the Trading Book" (FRTB).