Risk

RECENT NEWS
newratings.com  6 hrs ago  Comment 
CANBERA (dpa-AFX) - Asian stocks rose on Wednesday as solid U.S. earnings and economic data as well as easing concerns about the Ukraine crisis and violence in Gaza helped to improve investors' risk appetite. U.S. inflation figures were tame,...
Reuters  7 hrs ago  Comment 
Shale plays are ideal for oil and gas companies that need to limit risk in countries with a history of political and economic instability and poor respect for private property.
The Economic Times  9 hrs ago  Comment 
Nikkei share average edged down in choppy trade as investors sought to avoid geopolitical risk, dragging down index-heavyweight SoftBank Corp & exporters like Honda.
New York Times  12 hrs ago  Comment 
The United Nations expressed concern about the possible spread of polio in the war-ravaged countries of Syria and Iraq and beyond on Tuesday.
Yahoo  Jul 23  Comment 
European equities edged higher in early trade on Wednesday, extending gains from Tuesday after a batch of positive earnings and U.S. economic data briefly calmed worries over stretched valuations and the ...
Mondo Visione  Jul 22  Comment 
The European Securities and Markets Authority (ESMA) has launched a consultation on the calculation of counterparty risk by Undertakings for Collective Investment in Transferable Securities (UCITS) which enter into OTC derivative transactions...
MedPage Today  Jul 22  Comment 
(MedPage Today) -- Higher salt intake was associated with a greater risk of cardiovascular disease in patients with type 2 diabetes, researchers in Japan found.
Mondo Visione  Jul 22  Comment 
DataArt, a custom software development partner for the financial services and other select industries, and German-based management consultant zeb, today announced they have successfully completed a new release of zeb’s risk and portfolio...




 

Risk in economic terms indicates the probability of the occurance of a specific event, which would lead to damage or loss (p.e. the likelihood of losing ship and freight to a hurricane). In distinction to risk, chance indicates the possibility of a positive outcome.

Investments include both risk and chance. This is the so called Risk-Return Tradeoff: low levels of uncertainty offer low potential returns but also low potential losses, whereas high levels of uncertainty offer high potential returns but also high potential losses. Another way many investors quantify and calculate risk is in terms of the standard deviation of returns. This is because all else being equal, risk averse investors prefer returns that are less volatile and more predictable.

Companies try to identify, analyse and control risk through concepts of risk management.

Risks of Bond Investing

Bonds carry credit risk ("will I get my money back?"), prepayment risk, liquidity risk and interest-rate risk.

  • Many bonds give the bond issuer the right to repay the bond early -- which happens more often when rates are low, in other words, just when you don't want your money back. This is prepayment risk.
  • Liquidity risk is the risk that you won't find a good price for your bond when you want to sell it -- because there are so many more bond issuers than stock issuers, and because bonds are not exchange-traded, there may not be a willing buyer.
  • Interest-rate risk is the opposite of prepayment risk: when rates go up, the value of your bond will drop (it drops more, the further away it is from maturity). If your circumstances change and you need to sell the bond before maturity, you can lose capital that you would otherwise receive, if you held the bond to maturity.
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