Market Risk Flashcards
1
Q
Describe Market Risk?
A
Market Risk, also market price risk, results from unexpected changes in market prices related to assets and liabilities of a firm.
Examples are Equity risks, Interest rate risk
2
Q
Describe Equity Risk
A
Equity risk results from stock price fluctuations which influence the market value of equity-based investments of a company.
3
Q
What is the Portfolio theory (Portfolio selection theory) about?
A
Deals with the question how investors decide and should decide on their optimal portfolio
Key Assumptions:
Investors care about two parameters: return and volatility
Investors are risk averse, for a given return investors choose the investment with the lowest risk
