Question

Q1 Which of the following is market risk? Choose all that apply.

			Default risk
			Foreign exchange risk
			Commodity price risk

Q2

__________ is the risk that fluctuations in market prices will reduce the value of a security or portfolio, while ____________ is a risk of loss due to physical catastrophe or any technical or process errors in the firm’s operations.

		Market risk; credit risk
		Credit risk; liquidity risk
		Market risk; operational risk
		Credit risk; business risk

Answer 1

1. Market risk is a risk that fluctuations in the market will be e decreasing the value of security and it is related to factors like foreign exchange risk because these are the risk that cannot be managed.

So market risk will be foreign exchange risk.

Commodity pricing risk and default risk are industry specific risk and they can be managed.

Correct answer is option (B) foreign exchange risk.

2.market risk is risk that fluctuation in market price will reduce the value of security and operational risk risk of loss due to physical catastrophe.

All other options except ( C) are false

So the correct answer would be option (C) market risk, operational risk.