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MARKET RISK
What is market risk in the context of banking?
Market risk is the risk of losses in on- and off-balance-sheet positions arising from adverse movements in market prices, including interest rates, equity prices, foreign exchange rates, and commodity prices.
What is the difference between systematic risk and unsystematic risk in market risk?
Systematic risk affects the whole market; unsystematic is firm-specific.
Which Basel framework introduced the standardised approach for market risk capital requirements?
The Basel III Fundamental Review of the Trading Book (FRTB), finalized in 2019, introduced the revised Standardised Approach (SA) and Internal Models Approach (IMA) for market risk capital requirements.
What is a risk factor in the context of market risk measurement?
A variable whose movement drives changes in portfolio value.
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