Prisrisk

Prisrisk refers to the risk that the value of an asset, portfolio, or financial position will change due to movements in market prices. The term is used in risk management to describe exposure to fluctuations in prices across assets such as equities, bonds, commodities, and currencies. It covers both sudden price gaps and gradual price shifts and can be measured for a specific horizon or scenario.

Calculation methods include scenario analysis, value-at-risk focused on price inputs (price VaR), and Monte Carlo simulations that model distributions of price changes. A simple delta approach estimates changes in portfolio value from small moves in underlying prices, while more advanced methods incorporate correlations, volatility surfaces, and liquidity adjustments.

Applications include risk budgeting, performance measurement, regulatory reporting, and the pricing and hedging of derivatives with price-dependent payoffs. Prisrisk informs hedging strategies and capital allocation, and can be used to compare different portfolios’ sensitivity to market price movements.

Limitations arise from model risk and assumptions about horizon, liquidity, and correlations. Prisrisk is not a single standardized metric; it is a family of measures that must be tailored to the instrument and market context.

The term appears in contemporary risk management literature, particularly in European contexts, but is not uniformly defined in major financial references.