Verðbréfamarkaðsáhætta

Verðbréfamarkaðsáhætta, often translated as market risk or systematic risk, refers to the possibility of losses in an investment portfolio arising from factors that affect the overall performance of financial markets. This type of risk is inherent in investing in securities like stocks, bonds, and other financial instruments. It is distinct from specific risk, which relates to the performance of an individual company or industry.

Market risk can stem from a variety of sources, including changes in interest rates, currency exchange rates, commodity prices, and equity market volatility. For instance, a general economic downturn or geopolitical events can lead to widespread declines in stock prices, impacting even well-diversified portfolios. Similarly, unexpected changes in interest rates can negatively affect the value of bonds.

Investors cannot eliminate market risk entirely through diversification, as it affects the entire market. However, they can manage it through various strategies. These may include hedging with derivative instruments, adjusting asset allocation to include less volatile assets, or investing in assets that tend to perform well during different economic cycles. Understanding and assessing market risk is a crucial component of investment management and financial planning.