Risk

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Insurance Journal  5 hrs ago  Comment 
Throughout the quieter parts of the French Quarter, residents and businesses have posted signs that read “Caution: Walk in Large Groups. We (heart) N.O.P.D. We Just Need More.” It’s an unsettling message about violent crime in the Big Easy...
New York Times  Jan 26  Comment 
Most siblings with a diagnosis do not share the same genetic risk factors for the disorder and are as distinct in their behaviors as any brothers and sisters, scientists reported.
Mondo Visione  Jan 26  Comment 
Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals, today announced the findings of a new study which revealed that managing and mitigating conduct risk continues to be one of the highest...
Yahoo  Jan 26  Comment 
The government can bring more Americans into the housing market while managing risks that led to the housing crisis, Julian Castro told CNBC.
Motley Fool  Jan 26  Comment 
The good news: this beverage reduced the risk of an aggressive form of skin cancer by 20% in a very large study. The better news: 83% of you are already consuming this beverage on a daily basis!
The Economic Times  Jan 26  Comment 
The Korea Composite Stock Price Index (KOSPI) ticked 0.02 per cent lower to close at 1,935.68 points.




 

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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