Speculative risk

Speculative risk,

Definition of Speculative risk:

  1. 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.

  2. 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.

  3. 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?

  1. Speculative risk happens when there is an uncertain potential for gains or losses.
  2. 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.
  3. Pure risk is the potential for losses and, in contrast to speculative risk, there is no opportunity for gain.
  4. We analyzed the speculative risk and concluded that taking a calculated risk at this point was advisable as the upside was huge.
  5. You should always break down the speculative risk and figure out if it is worth taking on for this new venture.
  6. Sports betting, investing in stocks, and buying junk bonds are other examples of activities that involve speculative risk.
  7. 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.
  8. Assuming speculate risk is usually a choice and not the result of uncontrollable circumstances.

Meaning of Speculative risk & Speculative risk Definition