Financial risk
From Wikipedia, the free encyclopedia
In essence financial risk is any risk associated with money.
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[edit] Investment related
Depending on the nature of the investment, the type of 'investment' risk will vary.
A common concern with any investment is that you may lose the money you invest - your capital. This risk is therefore often referred to as capital risk.
If the assets you invest in are held in another currency there is a risk that currency movements alone may affect the value. This is referred to as currency risk.
Many forms of investment may not be readily salable on the open market (e.g. commercial property) or the market has a small capacity and may therefore take time to sell. Assets that are easily sold are termed liquid therefore this type of risk is termed liquidity risk.
[edit] Debt related
[edit] Insurance related
[edit] Business related
The risk that a company or project will not have adequate cash flow to meet financial obligations.
Financial risk is the additional risk a shareholder bears when a company uses debt in addition to equity financing. Companies that issue more debt instruments would have higher financial risk than companies financed mostly or entirely by equity.
Bilateral barter can depend upon a mutual coincidence of wants. Before any transaction can be undertaken, each party must be able to supply something the other party demands. To overcome this mutual coincidence problem, some communities had developed a system of intermediaries who can warehouse and trade goods. However, intermediaries often suffered from financial risk.
