Which of the following best describes market risk?

Market risk pertains to the potential for an investor to experience losses due to factors that affect the overall performance of the financial markets. The correct choice highlights this aspect by emphasizing the risk of declines in the overall market. This type of risk affects all securities in the market whether they are stocks, bonds, or other investments, and is typically influenced by macroeconomic factors such as economic downturns, geopolitical events, and changes in investor sentiment.

In contrast, the other options refer to more specific types of risks. The risk associated with specific investment sectors relates to sector risk, where changes in the performance of a particular industry can impact the investments within that sector. The risk of default by a borrower pertains to credit risk, which focuses on the likelihood that a borrower will fail to meet their debt obligations. Lastly, the risk of changing interest rates refers to interest rate risk, particularly relevant for fixed-income investments where changes in rates can affect the value of bonds and similar instruments. These risks do not encompass the overall market changes that market risk involves, thus reinforcing why the correct answer best captures the essence of market risk.