Market risk refers to the potential for financial losses due to fluctuations in the overall market. This type of risk can affect various assets, including stocks, bonds, and commodities, as changes in market conditions can lead to price volatility. Factors such as economic indicators, interest rates, and geopolitical events can all contribute to market risk. Investors and companies often use strategies like diversification and hedging to manage market risk. By spreading investments across different asset classes or using financial instruments like options, they aim to reduce the impact of adverse market movements on their portfolios.