Which risk is NOT a component of LDI (Liability-Driven Investment) risks?

In the context of Liability-Driven Investment (LDI), the primary risks are those that directly impact the ability to meet liabilities. LDI strategies typically focus on matching the cash flows and duration characteristics of liabilities with the investment portfolio, which can expose investors to various risks, but market liquidity risk is not inherently considered a component of LDI risks.

Model risk, measurement error, and collateralization risk can significantly affect the effectiveness of an LDI strategy. Model risk arises from potential flaws in the models used to evaluate liabilities and investment performance. Measurement error refers to inaccuracies in assessing the value of assets or liabilities, which can mislead investment decisions. Collateralization risk relates to the adequacy and availability of collateral in derivative transactions, which is particularly relevant in managing interest rate exposure and funding liquidity.

Market liquidity risk, while important in a broader investment context, focuses on the ability to buy or sell assets without impacting their price significantly. In an LDI framework, while it's important to consider liquidity when making investment choices, the core risks directly impacting the liability management are more associated with accurate modeling, measurement, and the requirements related to collateral than with the liquidity of the market itself. Thus, market liquidity risk is considered the risk that is not a direct component