Definition
Market risk is the possibility of loss caused by adverse changes in prices, rates, volatility, correlations, or other broad market conditions.
In market context
The risk affects both individual positions and portfolios, and it can be amplified by leverage, concentration, or illiquidity. Diversification can reduce instrument-specific exposure but cannot remove a market-wide decline, while hedges may be incomplete or costly. Scenario analysis and position limits can help manage market risk, yet unexpected gaps and changing relationships mean realized losses can materially exceed historical estimates.
Source
Use the primary source for fuller regulatory or market context.
