What is market to price risk?

Market to price risk refers specifically to the risk of loss that an investor may face due to fluctuations in the market prices of assets. This can occur because the values of investments in a portfolio can rise or fall based on numerous market factors, including economic conditions, interest rates, and investor sentiment. Therefore, the correct answer emphasizes that this risk directly relates to the volatility of the market and how it impacts the prices of the securities in which an investor is interested.

The other options focus on different types of risks. Losing principal investment addresses the possibility of a loss of the initial amount invested but does not necessarily encompass the broader concept of market volatility. Risk from inflation changes pertains to the eroding purchasing power of investment returns but does not capture the way market prices can fluctuate. Finally, the risk of default on investments refers to the possibility that a borrower will not be able to fulfill their financial obligations, which is unrelated to changes in market prices. Understanding market to price risk is essential as it highlights the inherent uncertainties associated with investing in dynamic financial environments.