WA Business News  Aug 19  Comment 
Ratings agency Moody's has downgraded the outlook for Australia's banking system, warning that a challenging environment could hit banks' bottom lines and leave them more at risk to external shocks.
New York Times  Aug 18  Comment 
Allyson Felix was preparing to hand the baton to English Gardner when a Brazilian runner strayed into her lane. The Americans appealed and still qualified for the final.
MedPage Today  Aug 18  Comment 
(MedPage Today) -- Increased risk is small, but clinically meaningful, researchers say
guardian.co.uk  Aug 18  Comment 
High street retailer will close 141 stores as leases expire over the next five years as it moves to decouple its two brands Hundreds of jobs are at risk at one of Britain’s biggest high street retailers, Monsoon Accessorize, after it decided to...
Financial Times  Aug 18  Comment 
Drivers making half-hour trip from Turkish border face grave danger
Insurance Journal  Aug 18  Comment 
Holman Insurance Services LLC, a subsidiary of Maple Shade, N.J., based Holman Automotive Group Inc., has acquired Risk Partners Inc., a Medford, N.J., based commercial insurance brokerage and managing general underwriter. Following the...
The Economic Times  Aug 18  Comment 
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.7 percent, its biggest rise since August 8.
The Hindu Business Line  Aug 18  Comment 
Fed minutes dent prospect of near-term US rate hike


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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