What are the different types of capital market risk?
Most of the investments entails an element of risk and the capital market is no exception. The risks that are inherent in various types of investment are usually unique to the industry and risks associated with the capital market, are the result of factors that represent this particular type of investment. Different types of capital market risk as such include risks from the company or industry, the risks of the market itself, the risk of failure that is special to bond holders, risks that are the result of government regulations, and risks that can be attributed to the effects of inflation.
In analyzing the risk of capital market, one of the risks is to be considered, the market risk, which is the result of a general decline in the stock market as a whole, unlike isolated factors or pockets on the market. Such a decline could have been called by any number of factors and this effect is to cause immersion on the stock market that influencedInvestors across the album. The opposite of this type of prices on the stock market is the risk of a company that is strictly limited to a specific company in which the investor could give some money. This type of risk is related to the industrial risk affecting in particular companies. An example of such an industrial risk could be to reduce the general value of shares in the automotive industry due to a crisis that may have occurred in such an industry.
Another type of risk of capital market is credit risk that concerns those who have some form of bond. Such investments are usually carried out in good faith, without any security and are simply based on the investor's faith in the ability of the company or government entity to repay the loan by agreement. When these entities encounter some form difficult, which makes it difficult to repay money according to the conditions, it will represent a form of capital market risk. If the constant increase in inflation in the economy continues withoutE changes, the investor may suffer losses due to the fact that inflation cancels any profits. Also, those who invest in a company or industry at the wrong time, for example, when the influx turns profitability or relevance of products from this industry, this can lead to the risk of capital market that can cause losses.