RISK

DEFINITION OF RISK

 Possibility of incurring a loss in a financial transaction

 Risk is the potential for variability in returns

 Expected return and realized return

CHARACTERISTICS OF
INVESTMENT
The characteristics of investment can be
understood in terms of as
 - return,
 - risk,
 - safety,
 - liquidity etc.
ELEMENTS OF RISK

 Elements of the risk can be classified as follows,

 Systematic risk
 Unsystematic risk

Total risk=systematic risk + unsystematic risk

SYSTEMATIC RISK

Systematic risk includes the following risk,

 Interest risk
 Market risk
 Purchasing power risk
UNSYSTEMATIC RISK

 This includes the following risk,

 Business risk
 Financial risk