Investing and Global Finance News

More Types Of Risk

Country Risk is the risk that a country will default of its debts. When a country fails to pay its debts, many of the businesses institutions in the country are damages as well as companies outside of the country. County risk affects bonds, stocks, futures, options, and mutual funds in the defaulting country.

Foreign-Exchange Risk – When doing business or investing overseas one must take into account that currency exchange rates change in relation to one’s home currency. Therefore, the price of products or investments may be cheaper overseas but if the exchange rate changes one could lose money vis a vis the domestic currency.

Interest Rate Risk – this is the risk that an investment’s worth will change due to a change in interest rates. Of course, this could also work favorably for the investor.

Political risk is the risk that a government will suddenly change its policies affecting economics and business.

Market Risk is the risk that stock prices will rise and fall. This is also called volatility.

As an investor, you can see that there are several types of risk to be considered.

Sorry, comments are closed for this post.