Market risk is the risk that banks are exposed to through adverse movements in stock prices, interest rates, exchange rates, and commodity prices. The larger the potential movement in the market price of a financial asset, the more market risk a bank is exposed to. This is because with a greater range of potential outcomes the future value of that financial asset is harder to predict. This could result in a bank making a larger loss before exiting their position. This is referred to as the volatility of the asset. It's typically measured using the standard deviation. In this diagram, both security A and B move from 100 to 110 over the course of one year. However, security A, the dotted green line, moves in a purely linear fashion from 100 to 110. Security B, the red line, has a much more erratic price movement over the course of the year, sometimes it declines below 100, but at other times it may increase to over 110. If a bank wished to sell its investment at any particular point during the course of the year, security A would be relatively easy to predict, but security B's value would be much harder, or in other words, there'd be more uncertainty or risk for security B's value. Put more simply, it could be said that security B had more market risk.