What is Market Risk?
Because investments can rise or fall unexpectedly, the primary risk associated with an investment (the market risk) is characterized by the variability of returns produced by that investment. For example, an investment with a low variability of return is a savings account with a bank (low market risk). The bank pays a highly predictable interest rate. That interest rate also happens to be quite low. An internet stock is an investment with a high variability of return; it might quintuple, and it might fall 50% (high market risk). The standard way to calculate the market risk of investing in a particular security is to calculate the standard deviation of its past prices.
• Organisational Set Up for Market Risk Management • Liquidity Risk Management • Interest Rate Risk (IRR) Management • Foreign Exchange Risk Management • Treatment of Market Risk in the Proposed Basel Capital Accord (with Annexure 1 & 2) • Annexure: 3 – Sources, effects and measurement of interest rate risk • Annexure: 4 – Value at Risk (VaR) • Annexure: 5 – Stress Testing Other Moduiles in Risk Management • Module: 1 – Risk assessment & Risk Management – An Introduction (4 articles) • Module: 2 – Risk Management in Commercial Banks (7 articles) • Module: 3 – Asset – Liability Management ( ALM ) System Guidelines of RBI to Commercial Banks (11 articles) • Module: 4 – RBI Guidelines on Credit Risk & Credit Risk Management (10 articles) • Module: 6 – RBI Guidelines on Counterparty and Country Risks (one article) • module: 7 – Risk Based Supervision & Risk Based Internal Audit RBI Guidelines (4 articles) What is Market Risk Market Risk may be defined as the possibility of loss to a bank c
