Market risk relates to potential losses from movements in the market price of assets in which a position is held . Market risk will always exist to some degree as a result of the complexity of the global financial and economic systems. As it is impossible to determine with certainty whether a market or asset will rise or fall in value by some future date, there is always market risk associated with any investment. Historical values of a market should not be taken as an indication of the future performance of that market and neither can fundamental valuations be used as a reliable guide to future values. Both of these facets contribute to market risk.
Factors that may affect a market and its value are (but not limited too):
- movements in related and unrelated markets
- changes in interest rates
- changes in currency rates
- changes in monetary or fiscal policy
- movement of funds by institutions or fund managers
- politics and political uncertainty