Business and Personal Finance Dictionary

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• MARKET RISK
  
  One of six risks defined by the Federal Reserve. The risk of an increase or decrease in the market value/price of a financial instrument. Market values for debt instruments are affected by actual and anticipated changes in prevailing interest rates. Market values for all financial instruments, except direct obligations of the U.S. Treasury, are affected by either actual or perceived changes in credit quality. Market risk includes reinvestment risk - that is, the risk that all or part of the principal may be received when interest rates are lower than when the security was originally purchased. In that case, the principal must be reinvested at a lower rate than that originally received. Sometimes called market value risk. Also see interest rate risk and price risk.
  
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