INHERENT RISK: Credit and Market Risk. Author: Abdullah Haron and John Lee Hin Hock Presentation By: Mohd Khir Ashari. INHERENT RISK: MARRKET AND CREDIT RISK.
Author: Abdullah Haron and John Lee Hin Hock
Presentation By: MohdKhirAshari
The possibility of the counterparties not fulfilling pre-determined obligations.
Credit risk can be classified in the following way:
The risk of losses in on- and off-balance sheet positions from variation in market prices. IIFS carry out many asset-based transactions in which they take ownership of the physical asset as co-investors. This setting expose them to market risk – as the asset price may fluctuate.
Conventional FI are also exposed to this risk from the positions they held in financial instruments. The positions are held to secure short-term profit from price or interest rate variations or to hedge against other element in the trading books.