MiFID

Information on Risks Associated with Investing into Financial Instruments

Market risk is the risk of losing the position of the client due to changes in values of risk factors, whereby these values are usually determined by the market. The main components of the market risk are interest rate risk, exchange rate (currency) risk and equity risk.

Exchange rate – currency risk means the risk of losing of the positions of the client due to changes in the exchange rates.

Interest rate risk means the risk of losing the positions of the client due to changes in interest rate. Specific interest rate risk means the risk of a loss due to changes in prices of the interest rate instruments caused by factors relating to the issuer of the relevant financial instrument, and in the case of derivatives, of the issuer of the relevant underlying instrument.

Equity risk means the risk of losing the position of the client due to changes in the prices of property securities. Specific equity risk means the risk of a loss due to changes in prices of the equity instrument caused by factors relating to the issuer of the relevant financial instruments, and in the case of derivates, of the issuer of the relevant underlying instrument.

Risk of liquidity means the risk of a loss due to the fact that there is no possibility on the market to buy, sell or settle an investment at any time for a price normal on the marker.

Risk of settlement of a trade means the risk of a loss due to the fact that the settlement of financial transaction does not take place in line with agreed conditions.

Country risk means the risk of a loss due to the fact that relevant state authorities in given country will not be able or willing to observe their commitments against foreign countries, and other debtors in that country will not be able to fulfil their commitments due to the fact that they are residents of the country.

Risk of leverage effect means the risk an investor may face due to trading based on collaterals, when the investor may invest into financial instruments of the nominal value several times higher than the value of the investor´s available funds. In the case of an unfavourable development, the leverage effect may, however, bring its investor a loss several times higher than the loss the investor would make if he invested into financial instruments only in the amount of his available financial funds kept on the account.