Risk

RECENT NEWS
Bloomberg  2 hrs ago  Comment 
Portfolio flows to emerging markets slowed sharply in August after months of robust investment, in what may be an early sign of a weaker appetite for risk, according to the Institute of International Finance.
Financial Times  2 hrs ago  Comment 
Festivals have become big business, while being while gaining much of their appeal from being a respite from the capitalist world
The Hindu Business Line  2 hrs ago  Comment 
Clearing corporations will dip into the fund in case of default by participants
Forbes  3 hrs ago  Comment 
So, your company has decided to outsource. Maybe to reduce cost. Maybe to leverage expertise. Maybe to streamline operations. For whatever reason, you’ve pushed various tasks to someone else. Call centers, transaction processing, application...
Insurance Journal  3 hrs ago  Comment 
New maps from the Federal Emergency Management Agency have reclassified hundreds of Oahu properties and placed them in a high-risk flood zone. Mortgage lenders will likely require property owners to buy flood insurance if they find themselves in...
The Australian  6 hrs ago  Comment 
THE RET must be settled within two years or consumers could face a spike in electricity prices, a leading energy expert warns.
SeekingAlpha  7 hrs ago  Comment 
By BDC Buzz: This is a series of articles to assess risk for the 26 BDCs that I cover and a follow up to my other "BDC Risk Profile" articles. There are many reasons why assessing risk for BDCs is important, including expected returns, valuations,...
Cloud Computing  8 hrs ago  Comment 
News about another E. coli outbreak, labor abuses and unsafe factory conditions permeate today’s headlines. Consumers and the companies who make and sell products have cause for concern; in a vastly expanded global supply...
Insurance Journal  9 hrs ago  Comment 
QBE Insurance Group Ltd.’s John Neal is shoring up the insurer’s balance sheet by selling shares and assets. He still has work to do convincing bond investors that business is improving after three profit warnings in two years. QBE debt...




 

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.
Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki