Definition of Speculative risk:
Speculative risk is a category of risk that, when undertaken, results in an uncertain degree of gain or loss. All speculative risks are made as conscious choices and are not just a result of uncontrollable circumstances. Since there is some chance of either a gain or a loss, speculative risk is the opposite of pure risk, which is the possibility of only a loss and no potential for gain.
Almost all investment activities involve some speculative risks, as an investor has no idea whether an investment will be a blazing success or an utter failure. Some assets—such as an options contract—carry a combination of speculative risk and risk that you can hedge.
Insurance industry term for a situation where the possibility of either a financial loss or a financial gain exists, such as in purchase of shares or betting on horses. Unlike pure risks, speculative risks are usually not insurable.
How to use Speculative risk in a sentence?
- Speculative risk happens when there is an uncertain potential for gains or losses.
- Buying a call option contract is an example of taking on a speculative risk, as there is potential for gains, while the possibility of losses—in terms of the premium paid for the contract—exist as well.
- Pure risk is the potential for losses and, in contrast to speculative risk, there is no opportunity for gain.
- We analyzed the speculative risk and concluded that taking a calculated risk at this point was advisable as the upside was huge.
- You should always break down the speculative risk and figure out if it is worth taking on for this new venture.
- Sports betting, investing in stocks, and buying junk bonds are other examples of activities that involve speculative risk.
- It was a speculative risk , but I still thought we had to take it, because if it worked, we would be a lot better off.
- Assuming speculate risk is usually a choice and not the result of uncontrollable circumstances.
Meaning of Speculative risk & Speculative risk Definition