Financial risk
Financial risk and return
Risk is embedded in all financial assets; it cannot be eliminated, but it can be measured and mitigated (eg with a diversification strategy). Therefore, it can have both positive and negative connotations. When we talk about investment, financial risk implies the possibility of deviation from the expected investment return.
Return is the financial effect of the investment on the reference date, expressed in percentages and depends on a number of factors that are not always predictable.
Learn more about the main risks to which financial investments are exposed
Market risk
It occurs due to changes in the prices of securities.
Credit risk
Credit risk is the risk of losing part or all of the value of assets invested in debt securities, money market instruments or deposits due to the failure of the issuer of the debt security or the bank to pay the corresponding interest and/or principal. For example in the case of bonds, the risk that the issuer will not be able to pay the principal/interest according to the agreed terms.
Business risk
The risk of realizing the company's financial result.
Inflation risk
It occurs when inflation erodes the purchasing power of money.
Liquidity risk
It occurs when the sale of a financial instrument is difficult due to the characteristics of the market where the transaction is carried out.
Credit risk of a specific country
The credit risk of a particular country is called sovereign risk. Country risk occurs when conducting transactions with or in a certain country, due to an unstable economic, political or social system. The exposure of a country to various political, economic and other risks affects all participants in the markets of that country.
Counterparty risk
It occurs when the other party to certain contracts cannot fulfill its obligations.
Sustainability risk
It occurs when an environmental, social or political event or condition can have a significant actual or potential negative impact on the value of the investment.
Exchange rate risk
It is related to the change in the exchange rate between two currencies, which affects the value of an asset or investment expressed in a foreign currency,
Investments
Good information helps in making investment decisions.
To bring you closer and simplify the world of investing, visit the new section Educational on investments and improve your knowledge of basic investment terms.
For more information, visit the nearest PBZ branch.
