What are the different types of risks in investment banking?

Question

What different risks may occur in investment banking?

Answer 1

There are three primary types of risks in investment banking: market risk, credit risk, and operational risk.

•  Market risk is the risk of losses resulting from fluctuations in the financial markets. 

• Credit risk is the risk of losses resulting from borrowers failing to repay their debts or obligations. 

• Operational risk is the risk of losses resulting from internal operational failures or external events, such as system failures, fraud, or natural disasters. 

Other types of risks that investment banks may face include liquidity risk, legal risk, reputational risk, and systemic risk. 

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