RISK & TYPES

OF RISK

Risk Means:
The uncertainty in the probability distribution of
returns.
Thus in order to consider risk generally, for an action and a
thing, 3 must be:
1. a loss associated with it
2. an element of uncertainty or chance and
3. some choice among alternatives
Involves a situation about which the likelihood of the possible
outcomes is not known.

Types of risks can be classified primarily on the

basis of such internal or external forces or
influences.
Risks
Systematic Risk

Unsystematic Risk

1.Systematic Risk:
In investments those forces that are uncontrollable ,
external and broad in their effect are called
sources of systematic risk. Economics, Political
and Sociological changes are sources of
Systematic Risk.

2.Unsystematic Risk:
Unsystematic Risk is that portion of total risk that is
peculiar (specific) to a firm or an industry and
these are internal Factors such as management
capability, consumer preferences and labor strikes
can cause unsystematic variability of returns for a
companys stocks.
The Minor Categories of Risk as Follows
1.Market Risk:
Market risk arises du to changes in demand and
Supply pressures in the markets.

2.Interest Rate Risk:

The interest depend upon nature of
instruments ,Equity shares,
debentures and loans.