What Is Speculative Risk?

Refers to both the risk of loss and the potential for profit

Speculative risk

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Refers to both the risk of loss and the potential for profit

Speculative risk refers to the uncertainty that may generate both gains and losses.

There are three possible outcomes of this type of risk: no loss, loss, and profit. For example, stock investment. After buying a certain stock, investors may gain due to the rise in the stock price, or may suffer losses due to the decline in the stock price. Certainly, such risks are speculative risks.

Higher risks usually bring higher returns.

For financial institutions, speculative risks include:

Liquidity risk

Market risk

credit risk

In contrast, pure risk: There is only the opportunity to lose, and there is no risk of profit.

There are only two possible consequences of this risk, namely "no loss" or "cause loss". For example, natural disasters, human life and death.