Risk

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Insurance Journal  4 hrs ago  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...
newratings.com  5 hrs ago  Comment 
WASHINGTON (dpa-AFX) - Trading in the U.S. index futures shows that Wall Street stocks may open Thursday's session on a nervous note. Asian stocks closed mixed earlier in the global trading day amid positive Japanese trade data,...
The Economic Times  9 hrs ago  Comment 
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.7 percent, its biggest rise since August 8.
Forbes  Aug 18  Comment 
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New York Times  Aug 18  Comment 
A study finds that errors were made because earlier research linking genetic traits to illness did not include enough blacks.
Forbes  Aug 17  Comment 
Chance The Rapper's participation in the #SoGoneChallenge caused a massive spike in streams and sales for the 2003 version of Monica's "So Gone."
Forbes  Aug 17  Comment 
Last Chance U., the latest and I think best sports reality show ever, has happily been renewed for a second season on Netflix. If you have not seen the six-episode first season, I highly recommend setting aside a few hours for binge watching to...




 

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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