Slide 1
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:a loss associated
with itan element of uncertainty or chance andsome choice among
alternativesInvolves 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 Follows1.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.
