Market Risk Limits

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Market-risk limits are fundamental controls over the risks inherent in trading activities. Banks need to establish market risk limits related to their risk measures and these limits should be consistent with maximum exposures authorized by their senior management and board. These limits are also allocated to business units and individual traders. The risk management function is responsible for ensuring that exceptions to limits are identified and addressed by management. Some limit systems also include additional features, such as stop-loss limits and trading guidelines.

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