Definition of Market Risk

Financial Terms Beginning with M

What is Market Risk

Market risk or systemic risk is the risk or probability of investments declining in value because of economic developments or other events that affect the entire market or market segment. Price volatility often arises due to unanticipated fluctuations in factors that commonly affect the entire financial market.

Key sources of market risk include changes in interest rates, political turmoil, recessions, natural disasters and terrorist attacks. Exposure to market risk cannot be avoided or taken away through diversification, which is why it is also known as undiversifiable risk.

Glossary of Terms and Phrases

A financial dictionary or glossary is an essential tool to better understand the meaning of a specialized term or phrase. It would obviously make life much easier if everyone spoke the same language and used the same financial terms and phrases but that is not realistic.

We learn new languages to communicate with each other, transact business globally and to appreciate other cultures. Global finance is a specialized language that if understood and mastered, it will provide benefits that help to decrease risk and improve investment returns. Financial literacy is the foundation of developing good investment strategies and sound decision making.

Related Investment Terms

Currency Risk

Foreign Investment Risk

Unsystemic Risk

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