Investment Risks

Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority and you can order it here)

The basic risks in INVESTMENT are financial risk (risk of nonpayment by the obligor or issuer), also known as credit risk; interest rate risk (risk of open market price depreciation should interest rates rise, applicable to high-grade bonds and obligations), also known as money risk; and purchasing power risk (risk of decline in purchasing power of principal and income because of rise in the price level), also known as inflation risk.  Investment ratings (quality ratings) reflect primarily financial risk.

Other risks include governmental and political risk; foreign exchange and expropriation risk; risk of institutional change (in social and economic system); risk of war and international tension.

Back to Information