Risk Flashcards
Liquidity Risk
Difficulty in selling (turning an asset to cash) quickly
Inflation Risk
Progressive decrease in value of a currency over time often caused by increases in its availability
Interest Rate Risk
Decline in prices of debt securities due to an increase in market interest rates
Market Risk
Decline in value of an asset due to its association with a decline in the broader market as a whole
Purchasing power risk
Aka inflation risk, this speaks to the progressively declining present-day monetary value of an asset limiting the ability to buy “equal value” future assets
Default Risk
Inability of an issuer to make future principal and/or interest payments to bondholders
Political Risk
Changes to the governing authorities that affect the things such as the value, marketability, future prospects of an investment
Reinvestment Risk
Declines in market interest rates mean future investments in debt securities will be at lower rates
Credit Risk
A decrease in the expected ability of an issuer to meet their future financial obligations which may lead to default
Non-systematic Risk
Drop in value of an asset that is not attributable to a decline in the overall market, market segment, or industry in which it resides
Legislative Risk
Changes in law, or policy, usually concerning taxes, that negatively affect investment
Business Risk
Mismanagement or new innovations cause a company to lose value
Marketability Risk
Difficulty in finding a buyer in the market necessitating a drop in price to sell
