Question

Explain the differences between market risk, credit risk, liquidity risk, and
operational risk

Answer 1

Market Risk : Market risk the risk that the environment/Industry in which company operate changes. For example if company is in business of importing liquor and goverment bans sale of liquor where it is importing.

Credit risk : Credit risk is the risk of running out of money to pay bills.

Liquidity risk : Liquidity risk is the risk that company might not able to convert it's current asset into cash. For example if company has certain stock and due to technology change such stock becomes useless and might not get sold

Operational risk : Operational risk refers to risk that emerge from company's regular business such as fraud , lawsuits etc