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Price Risk

Exposure to adverse changes in market prices that can negatively affect revenues, costs, or portfolio valuation.

Price risk is the potential for financial loss due to adverse movements in commodity, equity, or currency prices.

In oil trading, price risk arises from fluctuations in crude, refined products, or energy derivatives. Factors include supply-demand imbalances, geopolitical events, and macroeconomic shifts.

Managing price risk involves hedging with futures, swaps, options, and physical contracts. Traders may use stop-loss orders, diversification, and scenario analysis.

Effective price risk management is essential to protect capital, optimize margins, and ensure sustainable trading operations.

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