What is the definition of 'market risk'?

Market risk, often referred to as systematic risk, is defined as the risk of loss arising from movements in market prices. This type of risk affects all investments across the board and is inherent in the overall market environment. Market risk is influenced by various factors, such as economic conditions, political events, and changes in investor sentiment, causing fluctuations in the value of investments.

Understanding this type of risk is crucial for investors since it cannot be eliminated through diversification; rather, it can only be managed or hedged against. The other options pertain to different kinds of risks: default risk specifically relates to the risk that a borrower may not repay a loan, interest rate risk involves the potential impact of changing interest rates on investment values, and international market fluctuations refer to risks associated with investing in foreign markets. Each of these represents a distinct type of risk that can affect investments but does not encompass the broader concept of market risk itself.