What is the difference between a credit risk assessment and a market risk assessment?

What is the difference between a credit risk assessment and a market risk assessment Introduction: The Significance of Risk Assessment Hello everyone! In the realm of finance, risk assessment plays a pivotal role. It enables institutions and investors to make informed decisions, safeguarding their interests. Today, we'll explore two key types of risk assessments: credit risk assessment and market risk assessment. While both are crucial, they differ in their focus and methodologies. Credit Risk Assessment: Evaluating Borrowers' Creditworthiness Credit risk assessment primarily revolves around evaluating the creditworthiness of borrowers. When a financial institution, such as a bank, lends money, it needs to ensure that the borrower has the ability and intention to repay. This assessment involves analyzing various factors, including the borrower's credit history, income, and existing debt. The aim is to gauge the likelihood of default and quantify the potential loss in case of non-repayment. Market Risk Assessment: Navigating Volatility and Uncertainty Market risk assessment, on the other hand, is concerned with the inherent volatility and uncertainty of financial markets. It encompasses the potential for losses arising from adverse market movements, such as fluctuations in interest rates, exchange rates, or commodity prices.