What is speculative risk?

speculative risk is a key feature of the vast majority of investment. It simply concerns the risk that an investment can lead to profit or loss. This differs from the "pure risk" concerning events that are guaranteed to cause a form of loss. There is a risk of an event with a pure risk. Pure risk only leads to negative results and is an inevitable part of life. Speculative risk has the potential to create positive or negative results and is specified on a voluntary basis. In most contexts, however, they are financially evaluated. Asking someone on a date is a speculative risk that could pay off by leading to a relationship or leading to a negative outcome of rejection. However, this would not usually be a financial point of view, however, does not fall into most of the two types of risks.

Within finance, a net risk is usually associated with insurance. This deals with the result of unpredictable events that have a negative result, such as injuries, theft or fire. Insurers calculateThey conceal insurance by combining the probability of an event with a financial loss that would result in.

speculative risk is usually associated with an investment that almost always carries the possibility to achieve profit or loss. The degree of risk may vary extremely. Betting for spread, a form of gambling on market movements, can be very risky because profits or losses can significantly outweigh ascending money. The purchase of a bond issued by a government is much less risky, although there is still a small risk that the government does not have to pay cash, whether it is unlikely.

Two types of risk were probably backed together by increasing integration of insurance and investment markets. For example, many insurance companies are now publicly traded companies. This means that shareholders risk speculative risk that is eventually based on the performance of the company. However, this performance is strongly associated with the pure riskKem, which transmits insurance companies, which means that the covered events actually occur, causing to make payouts. The convergence of both types of risks has increased due to the introduction of products such as catastrophe derivatives, which are effectively in the form of gambling on the loss that the insurance company has suffered.