Legal Dictionary

Search results for: “financial risk”

  • Liquidity Risk

    The risk that arises from the difficulty of selling an asset. It can be thought of as the difference between the true value of the asset and the likely price, less commissions….

  • Insolvency Risk

    The risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk….

  • Inflation Risk

    Also called purchasing-power risk, the risk that changes in the real return the investor will realize after adjusting for inflation will be negative….

  • Idiosyncratic Risk

    Unsystematic risk or risk that is uncorrelated to the overall market risk. In other words, the risk that is firm specific and can be diversified through holding a portfolio of stocks….

  • Herstatt Risk

    The risk of loss in foreign exchange trading that one party will deliver foreign exchange but the counterparty financial institution will fail to deliver its end of the contract. It is also referred to as settlement risk….

  • Geographic Risk

    Risk that arises when an issuer has policies concentrated within certain geographic areas, such as the risk of damage from a hurricane or an earthquake….

  • Funding Risk

    Related: interest rate risk…

  • Foreign Exchange Risk

    The risk that a long or short position in a foreign currency might have to be closed out at a loss due to an adverse movement in the currency rates….

  • Force Majeure Risk

    The risk that there will be an interruption of operations for a prolonged period after a project finance project has been completed due to fire, flood, storm, or some other factor beyond the control of the project’s sponsors….

  • Flat Price Risk

    Taking a position either long or short that does not involve spreading….

  • Firm-Specific Risk

    See:diversifiable risk or unsystematic risk….

  • Fallout Risk

    A type of mortgage pipeline risk that is generally created when the terms of the loan to be originated are set at the same time as the sale terms are set. The risk is that either of the two parties, borrower or investor, fails to close and the loan falls out of the […]

  • Exchange Rate Risk

    Also called currency risk, the risk of an investment’s value changing because of currency exchange rates….

  • Event Risk

    The risk that the ability of an issuer to make interest and principal payments will change because of rare, discontinuous, and very large, unanticipated changes in the market environment such as (1) a natural or industrial accident or some regulatory change or (2) a takeover or corporate […]

  • Equilibrium Market Price Of Risk

    The slope of the capital market line (CML). Since the CML represents the return offered to compensate for a perceived level of risk, each point on the line is a balanced market condition, or equilibrium. The slope of the line determines the additional return needed to compensate for a unit […]