Markaðsáhætta

Markaðsáhætta refers to the risk of losses in financial investments due to factors that affect the overall performance of financial markets. This is distinct from the risk associated with a specific company or security. Market risk is inherent in any investment that is traded on a public exchange, such as stocks, bonds, or commodities.

The primary drivers of market risk include economic downturns, political instability, changes in interest rates, inflation, and natural disasters. These events can lead to widespread declines in asset values across various sectors. For instance, a recession can cause stock prices to fall across the board, regardless of the individual company's performance. Similarly, unexpected increases in interest rates can negatively impact the value of existing bonds.

Investors attempt to manage market risk through diversification, spreading their investments across different asset classes, industries, and geographic regions. This strategy aims to reduce the impact of a negative event in one area on the overall portfolio. Hedging strategies, such as using options or futures contracts, can also be employed to offset potential market downturns. However, market risk cannot be entirely eliminated, as it is a fundamental characteristic of participating in financial markets. Understanding and assessing market risk is a crucial aspect of investment management.