Forbes  11 hrs ago  Comment 
It is one of the biggest challenges we face in weather communication. On a recent tubing trip, I heard a woman lamenting about rain. She said there was only a 20% chance of rain so "why was it raining, those meteorologists always get it wrong." I...
Financial Times  Nov 27  Comment 
Financial markets barely blinked as Russia and Turkey tangled
Forbes  Nov 27  Comment 
Recent global events should make everyone sensitive to the risks we all face every day just living our lives. Life in New York has still not returned to “normal” after 9/11 and life in Paris will never quite be the same, at least not in our...
The Economic Times  Nov 27  Comment 
Markets regulator Sebi today advised mutual fund houses to rely on their own risk assessment rather than depending on the grades assigned by credit rating agencies.
Financial Times  Nov 26  Comment 
Apprenticeship levy has flaws but business must take ownership
Times Online  Nov 26  Comment 
Bad news for parents who like to pack their children off to bed as soon as CBBC shuts down for...


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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