Market Risk
Accounting glossary · Understand, connect, apply
Market risk is exposure to changes in a financial instrument’s value or cash flows because market prices change. It includes currency, interest rate and other price risks.
Example
A company holds foreign shares. Movements in both share prices and exchange rates can affect the holding’s value in its reporting currency.
Remember the difference
The category identifies the source of the change in value or cash flows. A failure by a counterparty to pay creates credit risk.
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Prepared with AI assistance. Examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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