what is risk
and it's types please help in home work
maximum definition of risk has to be 8 or 10 lines
Answers
Answer:
Risk:-
In finance, risk is the probability that actual results will differ from expected results. In the Capital Asset Pricing Model (CAPM), risk is defined as the volatility of returns. The concept of “risk and return” is that riskier assets should have higher expected returns to compensate investors for the higher volatility and increased risk.
Types of Risk
Broadly speaking, there are two main categories of risk: systematic and unsystematic. Systematic risk is the market uncertainty of an investment, meaning that it represents external factors that impact all (or many) companies in an industry or group. Unsystematic risk represents the asset-specific uncertainties that can affect the performance of an investment.
Below is a list of the most important types of risk for a financial analyst to consider when evaluating investment opportunities:
Systematic Risk – The overall impact of the market
Unsystematic Risk – Asset-specific or company-specific uncertainty
Political/Regulatory Risk – The impact of political decisions and changes in regulation
Financial Risk – The capital structure of a company (degree of financial leverage or debt burden)
Interest Rate Risk – The impact of changing interest rates
Country Risk – Uncertainties that are specific to a country
Social Risk – The impact of changes in social norms, movements, and unrest
Environmental Risk – Uncertainty about environmental liabilities or the impact of changes in the environment
Operational Risk – Uncertainty about a company’s operations, including its supply chain and the delivery of its products or services
Management Risk – The impact that the decisions of a management team have on a company
Legal Risk – Uncertainty related to lawsuits or the freedom to operate
Competition – The degree of competition in an industry and the impact choices of competitors will have on a company