Chapter 7. Risk Overview
1. Explain the different types of risk.
2. Be able to calculate volatility risk for a stock.
DIFFERENT TYPES OF RISK
Definition: Risk describes the probability of an asset not performing as you would hope. It is the potential for an asset to lose value and for you to therefore lose money.
If you invest in a company you must consider all that could occur to cause that investment to underperform or become valueless. There is a risk the company may not execute on its strategy. There is a risk the economy enters a recession or certain changes render the company’s products useless. There is a risk that the company’s debt payments become too great, or a down year requires the company to file for bankruptcy because ...