A type of investment risk that arises from spikes in market volatility or substantial market swings, consequently affecting specific types of investments, particularly those embedded with a large degree of leverage.Examples of such investments include hedged investments, derivatives, highly leveraged instrument, margin accounts, etc.
For equities (e.g., a stock), a jump risk results from substantial changes in market prices typically due to news or developments after trading hours (taking place at times other than normal market hours). At a broader economic level, a jump risk occurs or coincides with currency and stock market crisis.
This risk is also known as an market event risk or a gap risk.
