7 Investment Risk Flashcards
1
Q
Outline 9 Types of Investment Risk
A
1) Systematic Risk - market risk
2) Unsystematic Risk - company risk namely business risk, management risk, Structure of company risk
3) Liquidity Risk
4) Inflation Risk
5) Interest Rate Change
6) Gearing Risk or leverage
7) Currency Risk
8) Credit Risk - default, downgrade, counterparty risk
9) Political Risk
2
Q
What is Volatility Risk
A
Measured by Standard Deviation step 1 calc diff to actual rtn setp 2 square the difference multiply diff sqrd add results and take sq root
3
Q
Correlation
A
How 2 investments perform in relation to each other
+ve correlation has value of +1
-ve correlation has value of -1
Zero Correlation do not share any correlaton
