1. **Yield Curve Risk:**

   - Banks face risk when pricing assets and liabilities based on different benchmarks.

   - Non-parallel movements in yield curves impact Net Interest Income (NII).

   - Evaluation of yield curve movements is crucial to understand the portfolio and income impact.

   - Yield curve risk is a type of basis risk related to different maturity benchmarks for liabilities and assets.

2. **Embedded Option Risk:**

   - Market interest rate changes prompt prepayment and exercise of options, affecting bank profitability.

   - Faster and higher interest rate changes increase embedded option risk, reducing projected cash flow and income.

   - Particularly experienced in volatile situations, embedded option risk is a reality in India.

3. **Reinvestment Risk:**

   - Uncertainty in future cash flow reinvestment interest rates poses a risk.

   - Mismatches in cash flows expose banks to Net Interest Income (NII) variations.

   - Banks offering different rates for the same tenor may face reinvestment risk if depositors shift for higher interest.

4. **Net Interest Position Risk:**

   - Banks with more earning assets than paying liabilities face interest rate risk.

   - Reduction in NII occurs when market interest rates decline and vice versa.

   - Impact on earnings or economic value of assets, liabilities, and OBS positions.

5. **Market Risk:**

   - Risk of adverse deviations in trading portfolio's mark-to-market value due to market movements.

   - Arises from adverse movements in prices of interest rate instruments, equities, commodities, and currencies.

   - Also known as Price Risk.