Market Risk
Short definition
Market risk is the effect of FX, rates, commodities and equities on cash or value. Commercial inventory, open FX and floating debt are the corporate face of that family.
Detailed explanation
VaR is a statistical loss estimate for ordinary markets; stress testing is for the tail and for breaks. Neither replaces the other.
A hedge can turn market risk into counterparty and liquidity risk. Pricing pass-through moves economic market risk into operations.
Why it matters for the CFO
The CFO’s macro first XI (rates, FX, inflation, commodities) is the input table for market risk; if the budget is closed to those shocks, the miss is mis-labelled “operational”.
How to read it
Position × shock is first order. Correlations go to one in a crisis; diversification fails in the tail.
Related calculators
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.