Five forms of market risk

Market risk doesn't have five manifestations, but only four:

(1) interest rate risk, refers to the uncertainty of market interest rate changes to the possibility of loss to the enterprise. Most of the prices of financial instruments are affected by interest rates, and factors affecting interest rate changes are mainly operating costs, inflation expectations, central bank monetary policy, the economic cycle, the level of international interest rates, the state of the capital market and other factors.

(2) Exchange rate risk refers to the possibility of loss in the local currency value of assets and liabilities, revenues and expenses of an economic entity that are denominated or measured in foreign currencies, as well as the cash flows that can be expected to be generated from future operations, as a result of changes in currency exchange rates.

Exchange rate fluctuations depend on the supply and demand situation in the foreign exchange market, mainly including the balance of payments, inflation rate, interest rate policy, exchange rate policy, market expectations, and speculative shocks, as well as the domestic political and economic aspects of each country.

(3) Stock price risk, is the risk of loss to the enterprise due to unfavorable changes in stock prices. Because of political and economic macro-factors, as well as technical and human factors and other individual or combined effects on the stock market, resulting in substantial fluctuations in stock prices in the stock market, thus bringing economic losses to the enterprises holding stocks.

(4) Commodity price risk refers to the risk of economic loss caused by unfavorable changes in the price of various commodities and their derivative positions held by an enterprise. Commodities mainly refer to commodity futures and spot that can be traded freely on the floor, especially in the form of commodity futures. Commodity price fluctuations depend on the country's economic situation, the supply and demand situation in the commodity market and speculative behavior.