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id="toc-Market_risk" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Market_risk"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.1</span> <span>Market risk</span> </div> </a> <ul id="toc-Market_risk-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Model_risk" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Model_risk"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.2</span> <span>Model risk</span> </div> </a> <ul id="toc-Model_risk-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Credit_risk" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Credit_risk"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.3</span> <span>Credit risk</span> </div> </a> <ul id="toc-Credit_risk-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Liquidity_risk" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Liquidity_risk"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.4</span> <span>Liquidity risk</span> </div> </a> <ul id="toc-Liquidity_risk-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Valuation_risk" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Valuation_risk"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.5</span> <span>Valuation risk</span> </div> </a> <ul id="toc-Valuation_risk-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Operational_risk" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Operational_risk"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.6</span> <span>Operational risk</span> </div> </a> <ul id="toc-Operational_risk-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Other_risks" class="vector-toc-list-item vector-toc-level-2"> <a class="vector-toc-link" href="#Other_risks"> <div class="vector-toc-text"> <span class="vector-toc-numb">1.7</span> <span>Other risks</span> </div> </a> <ul id="toc-Other_risks-sublist" class="vector-toc-list"> </ul> </li> </ul> </li> <li id="toc-Diversification" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Diversification"> <div class="vector-toc-text"> <span class="vector-toc-numb">2</span> <span>Diversification</span> </div> </a> <ul id="toc-Diversification-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Hedging" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Hedging"> <div class="vector-toc-text"> <span class="vector-toc-numb">3</span> <span>Hedging</span> </div> </a> <ul id="toc-Hedging-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-Financial_/_credit_risk_related_acronyms" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#Financial_/_credit_risk_related_acronyms"> <div class="vector-toc-text"> <span class="vector-toc-numb">4</span> <span>Financial / credit risk related acronyms</span> </div> </a> <ul id="toc-Financial_/_credit_risk_related_acronyms-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-See_also" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#See_also"> <div class="vector-toc-text"> <span class="vector-toc-numb">5</span> <span>See also</span> </div> </a> <ul id="toc-See_also-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-References" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#References"> <div class="vector-toc-text"> <span class="vector-toc-numb">6</span> <span>References</span> </div> </a> <ul id="toc-References-sublist" class="vector-toc-list"> </ul> </li> <li id="toc-External_links" class="vector-toc-list-item vector-toc-level-1 vector-toc-list-item-expanded"> <a class="vector-toc-link" href="#External_links"> <div class="vector-toc-text"> <span class="vector-toc-numb">7</span> <span>External links</span> </div> </a> <ul id="toc-External_links-sublist" class="vector-toc-list"> </ul> </li> </ul> </div> </div> </nav> </div> </div> <div class="mw-content-container"> <main id="content" class="mw-body"> <header class="mw-body-header vector-page-titlebar"> <nav aria-label="Contents" class="vector-toc-landmark"> <div id="vector-page-titlebar-toc" class="vector-dropdown vector-page-titlebar-toc vector-button-flush-left" > <input type="checkbox" id="vector-page-titlebar-toc-checkbox" role="button" aria-haspopup="true" data-event-name="ui.dropdown-vector-page-titlebar-toc" class="vector-dropdown-checkbox " aria-label="Toggle the table of contents" > <label id="vector-page-titlebar-toc-label" for="vector-page-titlebar-toc-checkbox" class="vector-dropdown-label cdx-button cdx-button--fake-button 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Available in 30 languages" > <label id="p-lang-btn-label" for="p-lang-btn-checkbox" class="vector-dropdown-label cdx-button cdx-button--fake-button cdx-button--fake-button--enabled cdx-button--weight-quiet cdx-button--action-progressive mw-portlet-lang-heading-30" aria-hidden="true" ><span class="vector-icon mw-ui-icon-language-progressive mw-ui-icon-wikimedia-language-progressive"></span> <span class="vector-dropdown-label-text">30 languages</span> </label> <div class="vector-dropdown-content"> <div class="vector-menu-content"> <ul class="vector-menu-content-list"> <li class="interlanguage-link interwiki-ar mw-list-item"><a href="https://ar.wikipedia.org/wiki/%D9%85%D8%AE%D8%A7%D8%B7%D8%B1_%D9%85%D8%A7%D9%84%D9%8A%D8%A9" title="مخاطر مالية – Arabic" lang="ar" hreflang="ar" data-title="مخاطر مالية" data-language-autonym="العربية" data-language-local-name="Arabic" class="interlanguage-link-target"><span>العربية</span></a></li><li class="interlanguage-link interwiki-az mw-list-item"><a href="https://az.wikipedia.org/wiki/Maliyy%C9%99_riski" title="Maliyyə riski – Azerbaijani" lang="az" hreflang="az" data-title="Maliyyə riski" data-language-autonym="Azərbaycanca" data-language-local-name="Azerbaijani" class="interlanguage-link-target"><span>Azərbaycanca</span></a></li><li class="interlanguage-link interwiki-ca mw-list-item"><a href="https://ca.wikipedia.org/wiki/Risc_financer" title="Risc financer – Catalan" lang="ca" hreflang="ca" data-title="Risc financer" data-language-autonym="Català" data-language-local-name="Catalan" class="interlanguage-link-target"><span>Català</span></a></li><li class="interlanguage-link interwiki-cs mw-list-item"><a href="https://cs.wikipedia.org/wiki/Finan%C4%8Dn%C3%AD_rizika" title="Finanční rizika – Czech" lang="cs" hreflang="cs" data-title="Finanční rizika" data-language-autonym="Čeština" data-language-local-name="Czech" class="interlanguage-link-target"><span>Čeština</span></a></li><li class="interlanguage-link interwiki-de mw-list-item"><a href="https://de.wikipedia.org/wiki/Finanzrisiko" title="Finanzrisiko – German" lang="de" hreflang="de" data-title="Finanzrisiko" data-language-autonym="Deutsch" data-language-local-name="German" class="interlanguage-link-target"><span>Deutsch</span></a></li><li class="interlanguage-link interwiki-et mw-list-item"><a href="https://et.wikipedia.org/wiki/Finantsrisk" title="Finantsrisk – Estonian" lang="et" hreflang="et" data-title="Finantsrisk" data-language-autonym="Eesti" data-language-local-name="Estonian" class="interlanguage-link-target"><span>Eesti</span></a></li><li class="interlanguage-link interwiki-el mw-list-item"><a href="https://el.wikipedia.org/wiki/%CE%A7%CF%81%CE%B7%CE%BC%CE%B1%CF%84%CE%BF%CE%BF%CE%B9%CE%BA%CE%BF%CE%BD%CE%BF%CE%BC%CE%B9%CE%BA%CF%8C%CF%82_%CE%BA%CE%AF%CE%BD%CE%B4%CF%85%CE%BD%CE%BF%CF%82" title="Χρηματοοικονομικός κίνδυνος – Greek" lang="el" hreflang="el" data-title="Χρηματοοικονομικός κίνδυνος" data-language-autonym="Ελληνικά" data-language-local-name="Greek" class="interlanguage-link-target"><span>Ελληνικά</span></a></li><li class="interlanguage-link interwiki-es mw-list-item"><a href="https://es.wikipedia.org/wiki/Riesgo_financiero" title="Riesgo financiero – Spanish" lang="es" hreflang="es" data-title="Riesgo financiero" data-language-autonym="Español" data-language-local-name="Spanish" class="interlanguage-link-target"><span>Español</span></a></li><li class="interlanguage-link interwiki-eo mw-list-item"><a href="https://eo.wikipedia.org/wiki/Financa_risko" title="Financa risko – Esperanto" lang="eo" hreflang="eo" data-title="Financa risko" data-language-autonym="Esperanto" data-language-local-name="Esperanto" class="interlanguage-link-target"><span>Esperanto</span></a></li><li class="interlanguage-link interwiki-eu mw-list-item"><a href="https://eu.wikipedia.org/wiki/Arrisku_finantzario" title="Arrisku finantzario – Basque" lang="eu" hreflang="eu" data-title="Arrisku finantzario" data-language-autonym="Euskara" data-language-local-name="Basque" class="interlanguage-link-target"><span>Euskara</span></a></li><li class="interlanguage-link interwiki-fa mw-list-item"><a href="https://fa.wikipedia.org/wiki/%D8%B1%DB%8C%D8%B3%DA%A9_%D9%85%D8%A7%D9%84%DB%8C" title="ریسک مالی – Persian" lang="fa" hreflang="fa" data-title="ریسک مالی" data-language-autonym="فارسی" data-language-local-name="Persian" class="interlanguage-link-target"><span>فارسی</span></a></li><li class="interlanguage-link interwiki-fr mw-list-item"><a href="https://fr.wikipedia.org/wiki/Risque_financier" title="Risque financier – French" lang="fr" hreflang="fr" data-title="Risque financier" data-language-autonym="Français" data-language-local-name="French" class="interlanguage-link-target"><span>Français</span></a></li><li class="interlanguage-link interwiki-ga mw-list-item"><a href="https://ga.wikipedia.org/wiki/Riosca_airgeadas" title="Riosca airgeadas – Irish" lang="ga" hreflang="ga" data-title="Riosca airgeadas" data-language-autonym="Gaeilge" data-language-local-name="Irish" class="interlanguage-link-target"><span>Gaeilge</span></a></li><li class="interlanguage-link interwiki-ko mw-list-item"><a href="https://ko.wikipedia.org/wiki/%EA%B8%88%EC%9C%B5%EC%9C%84%ED%97%98" title="금융위험 – Korean" lang="ko" hreflang="ko" data-title="금융위험" data-language-autonym="한국어" data-language-local-name="Korean" class="interlanguage-link-target"><span>한국어</span></a></li><li class="interlanguage-link interwiki-hy mw-list-item"><a href="https://hy.wikipedia.org/wiki/%D5%96%D5%AB%D5%B6%D5%A1%D5%B6%D5%BD%D5%A1%D5%AF%D5%A1%D5%B6_%D5%BC%D5%AB%D5%BD%D5%AF" title="Ֆինանսական ռիսկ – Armenian" lang="hy" hreflang="hy" data-title="Ֆինանսական ռիսկ" data-language-autonym="Հայերեն" data-language-local-name="Armenian" class="interlanguage-link-target"><span>Հայերեն</span></a></li><li class="interlanguage-link interwiki-id mw-list-item"><a href="https://id.wikipedia.org/wiki/Risiko_keuangan" title="Risiko keuangan – Indonesian" lang="id" hreflang="id" data-title="Risiko keuangan" data-language-autonym="Bahasa Indonesia" data-language-local-name="Indonesian" class="interlanguage-link-target"><span>Bahasa Indonesia</span></a></li><li class="interlanguage-link interwiki-it mw-list-item"><a href="https://it.wikipedia.org/wiki/Rischio_finanziario" title="Rischio finanziario – Italian" lang="it" hreflang="it" data-title="Rischio finanziario" data-language-autonym="Italiano" data-language-local-name="Italian" class="interlanguage-link-target"><span>Italiano</span></a></li><li class="interlanguage-link interwiki-lv mw-list-item"><a href="https://lv.wikipedia.org/wiki/Finan%C5%A1u_risks" title="Finanšu risks – Latvian" lang="lv" hreflang="lv" data-title="Finanšu risks" data-language-autonym="Latviešu" data-language-local-name="Latvian" class="interlanguage-link-target"><span>Latviešu</span></a></li><li class="interlanguage-link interwiki-lt mw-list-item"><a href="https://lt.wikipedia.org/wiki/Finansin%C4%97_rizika" title="Finansinė rizika – Lithuanian" lang="lt" hreflang="lt" data-title="Finansinė rizika" data-language-autonym="Lietuvių" data-language-local-name="Lithuanian" class="interlanguage-link-target"><span>Lietuvių</span></a></li><li class="interlanguage-link interwiki-nl mw-list-item"><a href="https://nl.wikipedia.org/wiki/Risico_(financieel)" title="Risico (financieel) – Dutch" lang="nl" hreflang="nl" data-title="Risico (financieel)" data-language-autonym="Nederlands" data-language-local-name="Dutch" class="interlanguage-link-target"><span>Nederlands</span></a></li><li class="interlanguage-link interwiki-pl mw-list-item"><a href="https://pl.wikipedia.org/wiki/Ryzyko_finansowe" title="Ryzyko finansowe – Polish" lang="pl" hreflang="pl" data-title="Ryzyko finansowe" data-language-autonym="Polski" data-language-local-name="Polish" class="interlanguage-link-target"><span>Polski</span></a></li><li class="interlanguage-link interwiki-pt mw-list-item"><a href="https://pt.wikipedia.org/wiki/Risco_financeiro" title="Risco financeiro – Portuguese" lang="pt" hreflang="pt" data-title="Risco financeiro" data-language-autonym="Português" data-language-local-name="Portuguese" class="interlanguage-link-target"><span>Português</span></a></li><li class="interlanguage-link interwiki-ru mw-list-item"><a href="https://ru.wikipedia.org/wiki/%D0%A4%D0%B8%D0%BD%D0%B0%D0%BD%D1%81%D0%BE%D0%B2%D1%8B%D0%B9_%D1%80%D0%B8%D1%81%D0%BA" title="Финансовый риск – Russian" lang="ru" hreflang="ru" data-title="Финансовый риск" data-language-autonym="Русский" data-language-local-name="Russian" class="interlanguage-link-target"><span>Русский</span></a></li><li class="interlanguage-link interwiki-sr mw-list-item"><a href="https://sr.wikipedia.org/wiki/Finansijski_rizik" title="Finansijski rizik – Serbian" lang="sr" hreflang="sr" data-title="Finansijski rizik" data-language-autonym="Српски / srpski" data-language-local-name="Serbian" class="interlanguage-link-target"><span>Српски / srpski</span></a></li><li class="interlanguage-link interwiki-sv mw-list-item"><a href="https://sv.wikipedia.org/wiki/Risk_(ekonomi)" title="Risk (ekonomi) – Swedish" lang="sv" hreflang="sv" data-title="Risk (ekonomi)" data-language-autonym="Svenska" data-language-local-name="Swedish" class="interlanguage-link-target"><span>Svenska</span></a></li><li class="interlanguage-link interwiki-th mw-list-item"><a href="https://th.wikipedia.org/wiki/%E0%B8%84%E0%B8%A7%E0%B8%B2%E0%B8%A1%E0%B9%80%E0%B8%AA%E0%B8%B5%E0%B9%88%E0%B8%A2%E0%B8%87%E0%B8%88%E0%B8%B2%E0%B8%81%E0%B8%81%E0%B8%B2%E0%B8%A3%E0%B8%A5%E0%B8%87%E0%B8%97%E0%B8%B8%E0%B8%99" title="ความเสี่ยงจากการลงทุน – Thai" lang="th" hreflang="th" data-title="ความเสี่ยงจากการลงทุน" data-language-autonym="ไทย" data-language-local-name="Thai" class="interlanguage-link-target"><span>ไทย</span></a></li><li class="interlanguage-link interwiki-uk mw-list-item"><a href="https://uk.wikipedia.org/wiki/%D0%A4%D1%96%D0%BD%D0%B0%D0%BD%D1%81%D0%BE%D0%B2%D0%B8%D0%B9_%D1%80%D0%B8%D0%B7%D0%B8%D0%BA" title="Фінансовий ризик – Ukrainian" lang="uk" hreflang="uk" data-title="Фінансовий ризик" data-language-autonym="Українська" data-language-local-name="Ukrainian" class="interlanguage-link-target"><span>Українська</span></a></li><li class="interlanguage-link interwiki-vi mw-list-item"><a href="https://vi.wikipedia.org/wiki/R%E1%BB%A7i_ro_t%C3%A0i_ch%C3%ADnh" title="Rủi ro tài chính – Vietnamese" lang="vi" hreflang="vi" data-title="Rủi ro tài chính" data-language-autonym="Tiếng Việt" data-language-local-name="Vietnamese" class="interlanguage-link-target"><span>Tiếng Việt</span></a></li><li class="interlanguage-link interwiki-zh-yue mw-list-item"><a href="https://zh-yue.wikipedia.org/wiki/%E9%87%91%E8%9E%8D%E9%A2%A8%E9%9A%AA" title="金融風險 – Cantonese" lang="yue" hreflang="yue" data-title="金融風險" data-language-autonym="粵語" data-language-local-name="Cantonese" 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<div class="vector-body-before-content"> <div class="mw-indicators"> </div> <div id="siteSub" class="noprint">From Wikipedia, the free encyclopedia</div> </div> <div id="contentSub"><div id="mw-content-subtitle"></div></div> <div id="mw-content-text" class="mw-body-content"><div class="mw-content-ltr mw-parser-output" lang="en" dir="ltr"><div class="shortdescription nomobile noexcerpt noprint searchaux" style="display:none">Any of various types of risk associated with financing</div> <style data-mw-deduplicate="TemplateStyles:r1129693374">.mw-parser-output .hlist dl,.mw-parser-output .hlist ol,.mw-parser-output .hlist ul{margin:0;padding:0}.mw-parser-output .hlist dd,.mw-parser-output .hlist dt,.mw-parser-output .hlist li{margin:0;display:inline}.mw-parser-output .hlist.inline,.mw-parser-output .hlist.inline dl,.mw-parser-output .hlist.inline ol,.mw-parser-output .hlist.inline ul,.mw-parser-output .hlist dl dl,.mw-parser-output .hlist dl ol,.mw-parser-output .hlist dl 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a{color:var(--color-progressive)!important}}@media screen and (prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .sidebar:not(.notheme) .sidebar-list-title,html.skin-theme-clientpref-os .mw-parser-output .sidebar:not(.notheme) .sidebar-title-with-pretitle{background:transparent!important}html.skin-theme-clientpref-os .mw-parser-output .sidebar:not(.notheme) .sidebar-title-with-pretitle a{color:var(--color-progressive)!important}}@media print{body.ns-0 .mw-parser-output .sidebar{display:none!important}}</style><table class="sidebar nomobile nowraplinks" style="border:1px solid #B2BEB5"><tbody><tr><td class="sidebar-pretitle" style="background:#ACE1AF">Categories of</td></tr><tr><th class="sidebar-title-with-pretitle" style="background:#ACE1AF;font-size:200%;font-weight:normal;padding-bottom:0.15em;"><a class="mw-selflink selflink">Financial risk</a></th></tr><tr><td class="sidebar-image"><span typeof="mw:File"><a href="/wiki/File:Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg" class="mw-file-description"><img src="//upload.wikimedia.org/wikipedia/commons/thumb/6/61/Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg/100px-Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg" decoding="async" width="100" height="49" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/commons/thumb/6/61/Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg/150px-Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg 1.5x, //upload.wikimedia.org/wikipedia/commons/thumb/6/61/Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg/200px-Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg 2x" data-file-width="500" data-file-height="244" /></a></span></td></tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Credit_risk" title="Credit risk">Credit risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Settlement_risk" title="Settlement risk">Settlement risk</a></li> <li><a href="/wiki/Concentration_risk" title="Concentration risk">Concentration risk</a></li> <li><a href="/wiki/Sovereign_credit_risk" title="Sovereign credit risk">Sovereign risk</a></li> <li><a href="/wiki/Default_(finance)" title="Default (finance)">Default risk</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Market_risk" title="Market risk">Market risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Interest_rate_risk" title="Interest rate risk">Interest rate risk</a></li> <li><a href="/wiki/Inflation_risk" class="mw-redirect" title="Inflation risk">Inflation risk</a></li> <li><a href="/wiki/Currency_risk" class="mw-redirect" title="Currency risk">Currency risk</a></li> <li><a href="/wiki/Equity_risk" title="Equity risk">Equity risk</a></li> <li><a href="/wiki/Commodity_risk" title="Commodity risk">Commodity risk</a></li> <li><a href="/wiki/Volatility_risk" title="Volatility risk">Volatility risk</a></li> <li><a href="/wiki/Systemic_risk" title="Systemic risk">Systemic risk</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Liquidity_risk" title="Liquidity risk">Liquidity risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Refinancing_risk" title="Refinancing risk">Refinancing risk</a></li> <li><a href="/wiki/Deposit_risk" title="Deposit risk">Deposit risk</a></li> <li><a href="/wiki/Margining_risk" title="Margining risk">Margining risk</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Investment_risk" class="mw-redirect" title="Investment risk">Investment risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Model_risk" title="Model risk">Model risk</a></li> <li><a href="/wiki/Execution_risk" class="mw-redirect" title="Execution risk">Execution risk</a></li> <li><a href="/wiki/Valuation_risk" title="Valuation risk">Valuation risk</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Business_risk" class="mw-redirect" title="Business risk">Business risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Reputational_risk" class="mw-redirect" title="Reputational risk">Reputational risk</a></li> <li><a href="/wiki/Operational_risk" title="Operational risk">Operational risk</a></li> <li><a href="/wiki/Country_risk" title="Country risk">Country risk</a></li> <li><a href="/wiki/Political_risk" title="Political risk">Political risk</a></li> <li><a href="/wiki/Legal_risk" title="Legal risk">Legal risk</a></li> <li><a href="/wiki/Moral_hazard" title="Moral hazard">Moral hazard</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Profit_risk" title="Profit risk">Profit risk</a></th></tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Non-financial_risk" title="Non-financial risk">Non-financial risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Stranded_asset" title="Stranded asset">Stranded asset</a></li></ul></td> </tr><tr><td class="sidebar-navbar"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><style data-mw-deduplicate="TemplateStyles:r1239400231">.mw-parser-output .navbar{display:inline;font-size:88%;font-weight:normal}.mw-parser-output .navbar-collapse{float:left;text-align:left}.mw-parser-output .navbar-boxtext{word-spacing:0}.mw-parser-output .navbar ul{display:inline-block;white-space:nowrap;line-height:inherit}.mw-parser-output .navbar-brackets::before{margin-right:-0.125em;content:"[ "}.mw-parser-output .navbar-brackets::after{margin-left:-0.125em;content:" ]"}.mw-parser-output .navbar li{word-spacing:-0.125em}.mw-parser-output .navbar a>span,.mw-parser-output .navbar a>abbr{text-decoration:inherit}.mw-parser-output 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title="Finance">Finance</a></th></tr><tr><td class="sidebar-image"><span class="notpageimage" typeof="mw:File"><a href="/wiki/File:Philippine-stock-market-board.jpg" class="mw-file-description"><img src="//upload.wikimedia.org/wikipedia/commons/thumb/d/d7/Philippine-stock-market-board.jpg/250px-Philippine-stock-market-board.jpg" decoding="async" width="250" height="188" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/commons/thumb/d/d7/Philippine-stock-market-board.jpg/375px-Philippine-stock-market-board.jpg 1.5x, //upload.wikimedia.org/wikipedia/commons/thumb/d/d7/Philippine-stock-market-board.jpg/500px-Philippine-stock-market-board.jpg 2x" data-file-width="640" data-file-height="480" /></a></span></td></tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="background:#efefef;;color: var(--color-base)"><a href="/wiki/Financial_market" title="Financial market">Markets</a></div><div class="sidebar-list-content mw-collapsible-content"><table class="sidebar nomobile nowraplinks" style="background-color: transparent; color: var( --color-base ); border-collapse:collapse; border-spacing:0px; border:none; width:100%; margin:0px; font-size:100%; clear:none; float:none"><tbody><tr><th class="sidebar-heading" style="background:#e9e9ff;font-weight:normal;font-style:italic;"> <a href="/wiki/Financial_asset" title="Financial asset">Assets</a></th></tr><tr><td class="sidebar-content hlist" style="padding-left:0.5em;padding-right:0.5em;"> <ul><li><a href="/wiki/Asset_(economics)" title="Asset (economics)">Asset (economics)</a></li> <li><a href="/wiki/Bond_market" title="Bond market">Bond</a></li> <li><a href="/wiki/Capital_appreciation" title="Capital appreciation">Asset growth</a></li> <li><a href="/wiki/Capital_asset" title="Capital asset">Capital asset</a></li> <li><a href="/wiki/Commodity_market" title="Commodity market">Commodity</a></li> <li><a href="/wiki/Derivatives_market" title="Derivatives market">Derivatives</a></li> <li><a href="/wiki/Domain_name_speculation" title="Domain name speculation">Domains</a></li> <li><a href="/wiki/Equity_(finance)" title="Equity (finance)">Equity</a></li> <li><a href="/wiki/Foreign_exchange_market" title="Foreign exchange market">Foreign exchange</a></li> <li><a href="/wiki/Money_market" title="Money market">Money</a></li> <li><span class="nowrap"><a href="/wiki/Over-the-counter_(finance)" title="Over-the-counter (finance)">Over-the-counter</a></span></li> <li><a href="/wiki/Private_equity" title="Private equity">Private equity</a></li> <li><a href="/wiki/Real_estate" title="Real estate">Real estate</a></li> <li><a href="/wiki/Spot_market" title="Spot market">Spot</a></li> <li><a href="/wiki/Stock_market" title="Stock market">Stock</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#e9e9ff;font-weight:normal;font-style:italic;"> <a href="/wiki/Financial_market_participants" title="Financial market participants">Participants</a></th></tr><tr><td class="sidebar-content hlist" style="padding-top:0.15em;"> <ul><li><a href="/wiki/Angel_investor" title="Angel investor">Angel investor</a></li> <li><a href="/wiki/Bull_(stock_market_speculator)" title="Bull (stock market speculator)">Bull (stock market speculator)</a></li> <li><a href="/wiki/Financial_planner" title="Financial planner">Financial planner</a></li> <li><a href="/wiki/Investor" title="Investor">Investor</a> <ul><li><a href="/wiki/Institutional_investor" title="Institutional investor">institutional</a></li></ul></li> <li><a href="/wiki/Retail" title="Retail">Retail</a></li> <li><a href="/wiki/Speculation" title="Speculation">Speculator</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#e9e9ff;font-weight:normal;font-style:italic;"> <a href="/wiki/Financial_centre" title="Financial centre">Locations</a></th></tr><tr><td class="sidebar-content hlist" style="padding-top:0.15em;"> <ul><li><a href="/wiki/Financial_centre" title="Financial centre">Financial centres</a></li> <li><a href="/wiki/Offshore_financial_centre" title="Offshore financial centre">Offshore financial centres</a></li> <li><a href="/wiki/Conduit_and_sink_OFCs" title="Conduit and sink OFCs">Conduit and sink OFCs</a></li></ul></td> </tr></tbody></table></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="background:#efefef;;color: var(--color-base)"><a href="/wiki/Financial_instrument" title="Financial instrument">Instruments</a></div><div class="sidebar-list-content mw-collapsible-content" style="padding-left:2.0em;padding-right:2.0em;"><div class="hlist"> <ul><li><a href="/wiki/Bond_(finance)" title="Bond (finance)">Bond</a></li> <li><a href="/wiki/Cash" title="Cash">Cash</a></li> <li><a href="/wiki/Collateralised_debt_obligation" class="mw-redirect" title="Collateralised debt obligation">Collateralised debt obligation</a></li> <li><a href="/wiki/Credit_default_swap" title="Credit default swap">Credit default swap</a></li> <li><a href="/wiki/Time_deposit" title="Time deposit">Time deposit</a> (<a href="/wiki/Certificate_of_deposit" title="Certificate of deposit">certificate of deposit</a>)</li> <li><a href="/wiki/Line_of_credit" title="Line of credit">Credit line</a></li> <li><a href="/wiki/Deposit_account" title="Deposit account">Deposit</a></li> <li><a href="/wiki/Derivative_(finance)" title="Derivative (finance)">Derivative</a></li> <li><a href="/wiki/Futures_contract" title="Futures contract">Futures contract</a></li> <li><a href="/wiki/Indemnity" title="Indemnity">Indemnity</a></li> <li><a href="/wiki/Insurance" title="Insurance">Insurance</a></li> <li><a href="/wiki/Letter_of_credit" title="Letter of credit">Letter of credit</a></li> <li><a href="/wiki/Loan" title="Loan">Loan</a></li> <li><a href="/wiki/Mortgage" title="Mortgage">Mortgage</a></li></ul> <div class="hlist"><ul><li><a href="/wiki/Option_(finance)" title="Option (finance)">Option</a> (<a href="/wiki/Call_option" title="Call option">call</a></li><li><a href="/wiki/Exotic_option" title="Exotic option">exotic</a></li><li><a href="/wiki/Put_option" title="Put option">put</a>)</li></ul></div> <ul><li><a href="/wiki/Performance_bonds" class="mw-redirect" title="Performance bonds">Performance bonds</a></li> <li><a href="/wiki/Repurchase_agreement" title="Repurchase agreement">Repurchase agreement</a></li> <li><a href="/wiki/Stock" title="Stock">Stock</a></li> <li><a href="/wiki/Security_(finance)" title="Security (finance)">Security</a></li> <li><a href="/wiki/Syndicated_loan" title="Syndicated loan">Syndicated loan</a></li> <li><a href="/wiki/Synthetic_CDO" title="Synthetic CDO">Synthetic CDO</a></li></ul> </div></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="background:#efefef;;color: var(--color-base)"><a href="/wiki/Corporate_finance" title="Corporate finance">Corporate</a></div><div class="sidebar-list-content mw-collapsible-content"><table class="sidebar nomobile nowraplinks" style="background-color: transparent; color: var( --color-base ); border-collapse:collapse; border-spacing:0px; border:none; width:100%; margin:0px; font-size:100%; clear:none; float:none"><tbody><tr><th class="sidebar-heading" style="background:#e9e9ff;font-weight:normal;font-style:italic;"> General</th></tr><tr><td class="sidebar-content hlist" style="padding-left:0.5em;padding-right:0.5em;"> <ul><li><a href="/wiki/Accounting" title="Accounting">Accounting</a></li> <li><a href="/wiki/Audit" title="Audit">Audit</a></li> <li><a href="/wiki/Capital_budgeting" title="Capital budgeting">Capital budgeting</a></li> <li><a href="/wiki/Capital_structure" title="Capital structure">Capital structure</a></li> <li><a href="/wiki/Corporate_finance" title="Corporate finance">Corporate finance</a></li> <li><a href="/wiki/Credit_rating_agency" title="Credit rating agency">Credit rating agency</a></li> <li><a href="/wiki/Enterprise_risk_management" title="Enterprise risk management">Enterprise risk management</a></li> <li><a href="/wiki/Enterprise_value" title="Enterprise value">Enterprise value</a></li> <li><a href="/wiki/Financial_risk_management" title="Financial risk management">Risk management</a></li> <li><a href="/wiki/Financial_statement" title="Financial statement">Financial statements</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#e9e9ff;font-weight:normal;font-style:italic;"> Transactions</th></tr><tr><td class="sidebar-content hlist" style="padding-left:0.5em;padding-right:0.5em;"> <ul><li><a href="/wiki/Leveraged_buyout" title="Leveraged buyout">Leveraged buyout</a></li> <li><a href="/wiki/Mergers_and_acquisitions" title="Mergers and acquisitions">Mergers and acquisitions</a></li> <li><a href="/wiki/Structured_finance" title="Structured finance">Structured finance</a></li> <li><a href="/wiki/Venture_capital" title="Venture capital">Venture capital</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#e9e9ff;font-weight:normal;font-style:italic;"> <a href="/wiki/Corporate_tax" title="Corporate tax">Taxation</a></th></tr><tr><td class="sidebar-content hlist" style="padding-left:0.5em;padding-right:0.5em;"> <ul><li><a href="/wiki/Base_erosion_and_profit_shifting" title="Base erosion and profit shifting">Base erosion and profit shifting</a> (BEPS)</li> <li><a href="/wiki/Corporate_tax_haven" class="mw-redirect" title="Corporate tax haven">Corporate tax haven</a></li> <li><a href="/wiki/Tax_inversion" title="Tax inversion">Tax inversion</a></li> <li><a href="/wiki/Tax_haven" title="Tax haven">Tax haven</a></li> <li><a href="/wiki/Transfer_pricing" title="Transfer pricing">Transfer pricing</a></li></ul></td> </tr></tbody></table></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="background:#efefef;;color: var(--color-base)"><a href="/wiki/Personal_finance" title="Personal finance">Personal</a></div><div class="sidebar-list-content mw-collapsible-content"> <ul><li><a href="/wiki/Credit_(finance)" class="mw-redirect" title="Credit (finance)">Credit</a> / <a href="/wiki/Consumer_debt" title="Consumer debt">Debt</a></li> <li><a href="/wiki/Employment_contract" title="Employment contract">Employment contract</a></li> <li><a href="/wiki/Financial_planner" title="Financial planner">Financial planning</a></li> <li><div class="hlist"><ul><li><a href="/wiki/Retirement" title="Retirement">Retirement</a></li><li><a href="/wiki/Student_loan" title="Student loan">Student loan</a></li></ul></div></li></ul></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="background:#efefef;;color: var(--color-base)"><a href="/wiki/Public_finance" title="Public finance">Public</a></div><div class="sidebar-list-content mw-collapsible-content"><table class="sidebar nomobile nowraplinks" style="background-color: transparent; color: var( --color-base ); border-collapse:collapse; border-spacing:0px; border:none; width:100%; margin:0px; font-size:100%; clear:none; float:none"><tbody><tr><th class="sidebar-heading" style="background:#e9e9ff;font-weight:normal;font-style:italic;;display:block;margin-top:0.15em;"> <a href="/wiki/Government_spending" title="Government spending">Government spending</a></th></tr><tr><td class="sidebar-content" style="padding-top:0.15em;"> <ul><li><a href="/wiki/Government_final_consumption_expenditure" title="Government final consumption expenditure">Final consumption expenditure</a></li> <li><div class="hlist"><ul><li><a href="/wiki/Government_operations" class="mw-redirect" title="Government operations">Operations</a></li><li><a href="/wiki/Redistribution_of_income_and_wealth" title="Redistribution of income and wealth">Redistribution</a></li></ul></div></li> <li><a href="/wiki/Transfer_payment" title="Transfer payment">Transfer payment</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#e9e9ff;font-weight:normal;font-style:italic;"> <a href="/wiki/Government_revenue" title="Government revenue">Government revenue</a></th></tr><tr><td class="sidebar-content" style="padding-top:0.15em;;padding-left:0.5em;padding-right:0.5em;"> <ul><li><div class="hlist"><ul><li><a href="/wiki/Tax" title="Tax">Taxation</a></li><li><a href="/wiki/Deficit_spending" title="Deficit spending">Deficit spending</a></li></ul></div></li> <li><div class="hlist"><ul><li><a href="/wiki/Government_budget" title="Government budget">Budget</a> (<a href="/wiki/Government_budget_balance" title="Government budget balance">balance</a>)</li><li><a href="/wiki/Government_debt" title="Government debt">Debt</a></li></ul></div></li> <li><a href="/wiki/Non-tax_revenue" title="Non-tax revenue">Non-tax revenue</a></li> <li><a href="/wiki/Warrant_of_payment" title="Warrant of payment">Warrant of payment</a></li></ul></td> </tr></tbody></table></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="background:#efefef;;color: var(--color-base)"><a href="/wiki/Bank" title="Bank">Banking</a></div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"> <ul><li><a href="/wiki/Central_bank" title="Central bank">Central bank</a></li> <li><a href="/wiki/Deposit_account" title="Deposit account">Deposit account</a></li> <li><a href="/wiki/Fractional-reserve_banking" title="Fractional-reserve banking">Fractional-reserve</a></li> <li><a href="/wiki/Full-reserve_banking" title="Full-reserve banking">Full-reserve</a></li> <li><a href="/wiki/Investment_banking" title="Investment banking">Investment banking</a></li> <li><a href="/wiki/Loan" title="Loan">Loan</a></li> <li><a href="/wiki/Money_supply" title="Money supply">Money supply</a></li></ul> </div> <ul><li><a href="/wiki/Lists_of_banks" title="Lists of banks">Lists of banks</a></li></ul> <table class="sidebar nomobile nowraplinks" style="background-color: transparent; color: var( --color-base ); border-collapse:collapse; border-spacing:0px; border:none; width:100%; margin:0px; font-size:100%; clear:none; float:none"><tbody><tr><th class="sidebar-heading" style="background:#e9e9ff;font-weight:normal;font-style:italic;;display:block;margin-top:0.15em;"> <a href="/wiki/Bank_regulation" class="mw-redirect" title="Bank regulation">Bank regulation</a></th></tr><tr><td class="sidebar-content" style="padding-top:0.15em;"> <ul><li><a href="/wiki/Banking_license" title="Banking license">Banking license</a></li> <li><a href="/wiki/Basel_Accords" title="Basel Accords">Basel Accords</a></li> <li><a href="/wiki/Bank_for_International_Settlements" title="Bank for International Settlements">Bank for International Settlements</a></li> <li><a href="/wiki/Financial_Stability_Board" title="Financial Stability Board">Financial Stability Board</a></li> <li><a href="/wiki/Deposit_insurance" title="Deposit insurance">Deposit insurance</a></li> <li><a href="/wiki/Separation_of_investment_and_retail_banking" title="Separation of investment and retail banking">Separation of investment and retail banking</a></li></ul></td> </tr></tbody></table></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="background:#efefef;;color: var(--color-base)"><a href="/wiki/Financial_regulation" title="Financial regulation">Regulation</a> <b>·</b> <a href="/wiki/Financial_law" title="Financial law">Financial law</a></div><div class="sidebar-list-content mw-collapsible-content"><table class="sidebar nomobile nowraplinks" style="background-color: transparent; color: var( --color-base ); border-collapse:collapse; border-spacing:0px; border:none; width:100%; margin:0px; font-size:100%; clear:none; float:none"><tbody><tr><td class="sidebar-content"> <ul><li><a href="/wiki/International_Financial_Reporting_Standards" title="International Financial Reporting Standards">International Financial Reporting Standards</a></li> <li><a href="/wiki/ISO_31000" title="ISO 31000">ISO 31000</a></li> <li><a href="/wiki/Professional_certification_in_financial_services" title="Professional certification in financial services">Professional certification</a></li> <li><a href="/wiki/Fund_governance" title="Fund governance">Fund governance</a></li></ul></td> </tr></tbody></table></div></div></td> </tr><tr><td class="sidebar-content"> <div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="background:#efefef;;color: var(--color-base)"><a href="/wiki/Economic_history" title="Economic history">Economic history</a></div><div class="sidebar-list-content mw-collapsible-content"> <ul><li><a href="/wiki/History_of_private_equity_and_venture_capital" title="History of private equity and venture capital">Private equity and venture capital</a></li> <li><a href="/wiki/Recession" title="Recession">Recession</a></li> <li><a href="/wiki/Stock_market_bubble" title="Stock market bubble">Stock market bubble</a></li> <li><a href="/wiki/Stock_market_crash" title="Stock market crash">Stock market crash</a></li> <li><a href="/wiki/Accounting_scandals" title="Accounting scandals">Accounting scandals</a></li></ul></div></div></td> </tr><tr><td class="sidebar-below"> <ul><li><a href="/wiki/Outline_of_finance" title="Outline of finance">Outline</a></li> <li><span class="nowrap"><span class="noviewer" typeof="mw:File"><a href="/wiki/File:Emblem-money.svg" class="mw-file-description"><img alt="icon" src="//upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Emblem-money.svg/16px-Emblem-money.svg.png" decoding="async" width="16" height="16" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Emblem-money.svg/24px-Emblem-money.svg.png 1.5x, //upload.wikimedia.org/wikipedia/commons/thumb/f/f3/Emblem-money.svg/32px-Emblem-money.svg.png 2x" data-file-width="48" data-file-height="48" /></a></span> </span><a href="/wiki/Portal:Business_and_Economics" class="mw-redirect" title="Portal:Business and Economics">Business and Economics portal</a></li> <li><span class="nowrap"><span class="noviewer" typeof="mw:File"><span><img alt="icon" src="//upload.wikimedia.org/wikipedia/commons/thumb/5/55/Bills_and_coins.svg/16px-Bills_and_coins.svg.png" decoding="async" width="16" height="8" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/commons/thumb/5/55/Bills_and_coins.svg/24px-Bills_and_coins.svg.png 1.5x, //upload.wikimedia.org/wikipedia/commons/thumb/5/55/Bills_and_coins.svg/32px-Bills_and_coins.svg.png 2x" data-file-width="960" data-file-height="465" /></span></span> </span><a href="/wiki/Portal:Money" title="Portal:Money">Money portal</a></li></ul></td></tr><tr><td class="sidebar-navbar"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1239400231"><div class="navbar plainlinks hlist navbar-mini"><ul><li class="nv-view"><a href="/wiki/Template:Finance_sidebar" title="Template:Finance sidebar"><abbr title="View this template">v</abbr></a></li><li class="nv-talk"><a href="/wiki/Template_talk:Finance_sidebar" title="Template talk:Finance sidebar"><abbr title="Discuss this template">t</abbr></a></li><li class="nv-edit"><a href="/wiki/Special:EditPage/Template:Finance_sidebar" title="Special:EditPage/Template:Finance sidebar"><abbr title="Edit this template">e</abbr></a></li></ul></div></td></tr></tbody></table> <p><b>Financial risk</b> is any of various types of <a href="/wiki/Risk" title="Risk">risk</a> associated with <a href="/wiki/Finance" title="Finance">financing</a>, including <a href="/wiki/Financial_transaction" title="Financial transaction">financial transactions</a> that include company loans in risk of <a href="/wiki/Default_(finance)" title="Default (finance)">default</a>.<sup id="cite_ref-1" class="reference"><a href="#cite_note-1"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-2" class="reference"><a href="#cite_note-2"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> Often it is understood to include only <a href="/wiki/Downside_risk" title="Downside risk">downside risk</a>, meaning the potential for financial loss and uncertainty about its extent.<sup id="cite_ref-3" class="reference"><a href="#cite_note-3"><span class="cite-bracket">[</span>3<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-4" class="reference"><a href="#cite_note-4"><span class="cite-bracket">[</span>4<span class="cite-bracket">]</span></a></sup> </p><p><a href="/wiki/Modern_portfolio_theory" title="Modern portfolio theory">Modern portfolio theory</a> initiated by <a href="/wiki/Harry_Markowitz" title="Harry Markowitz">Harry Markowitz</a> in 1952 under his thesis titled "Portfolio Selection" is the discipline and study which pertains to <a href="/wiki/Financial_risk_management" title="Financial risk management">managing market and financial risk</a>.<sup id="cite_ref-5" class="reference"><a href="#cite_note-5"><span class="cite-bracket">[</span>5<span class="cite-bracket">]</span></a></sup> In modern portfolio theory, the <a href="/wiki/Variance" title="Variance">variance</a> (or <a href="/wiki/Standard_deviation" title="Standard deviation">standard deviation</a>) of a portfolio is used as the definition of risk. </p> <meta property="mw:PageProp/toc" /> <div class="mw-heading mw-heading2"><h2 id="Types">Types</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Financial_risk&action=edit&section=1" title="Edit section: Types"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>According to Bender and Panz (2021), financial risks can be sorted into five different categories. In their study, they apply an algorithm-based framework and identify 193 single financial risk types, which are sorted into the five categories <a href="/wiki/Market_risk" title="Market risk">market risk</a>, <a href="/wiki/Liquidity_risk" title="Liquidity risk">liquidity risk</a>, <a href="/wiki/Credit_risk" title="Credit risk">credit risk</a>, <a href="/wiki/Business_risk" class="mw-redirect" title="Business risk">business risk</a> and <a href="/wiki/Investment_risk" class="mw-redirect" title="Investment risk">investment risk</a>.<sup id="cite_ref-6" class="reference"><a href="#cite_note-6"><span class="cite-bracket">[</span>6<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading3"><h3 id="Market_risk">Market risk</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Financial_risk&action=edit&section=2" title="Edit section: Market risk"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <style data-mw-deduplicate="TemplateStyles:r1236090951">.mw-parser-output .hatnote{font-style:italic}.mw-parser-output div.hatnote{padding-left:1.6em;margin-bottom:0.5em}.mw-parser-output .hatnote i{font-style:normal}.mw-parser-output .hatnote+link+.hatnote{margin-top:-0.5em}@media print{body.ns-0 .mw-parser-output .hatnote{display:none!important}}</style><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Market_risk" title="Market risk">Market risk</a></div> <p>The four standard market risk factors are equity risk, interest rate risk, currency risk, and commodity risk: </p><p><a href="/wiki/Equity_risk" title="Equity risk">Equity risk</a> is the risk that stock prices in general (not related to a particular company or industry) or the implied <a href="/wiki/Volatility_(finance)" title="Volatility (finance)">volatility</a> will change. When it comes to long-term investing, equities provide a return that will hopefully exceed the risk free rate of return<sup id="cite_ref-7" class="reference"><a href="#cite_note-7"><span class="cite-bracket">[</span>7<span class="cite-bracket">]</span></a></sup> The difference between return and the risk free rate is known as the equity risk premium. When investing in equity, it is said that higher risk provides higher returns. Hypothetically, an investor will be compensated for bearing more risk and thus will have more incentive to invest in riskier stock. A significant portion of high risk/ high return investments come from emerging markets that are perceived as volatile. </p><p><a href="/wiki/Interest_rate_risk" title="Interest rate risk">Interest rate risk</a> is the risk that interest rates or the implied volatility will change. The change in market rates and their impact on the profitability of a bank, lead to interest rate risk.<sup id="cite_ref-:0_8-0" class="reference"><a href="#cite_note-:0-8"><span class="cite-bracket">[</span>8<span class="cite-bracket">]</span></a></sup> Interest rate risk can affect the financial position of a bank and may create unfavorable financial results.<sup id="cite_ref-:0_8-1" class="reference"><a href="#cite_note-:0-8"><span class="cite-bracket">[</span>8<span class="cite-bracket">]</span></a></sup> The potential for the interest rate to change at any given time can have either positive or negative effects for the bank and the consumer. If a bank gives out a 30-year mortgage at a rate of 4% and the interest rate rises to 6%, the bank loses and the consumer wins. This is an <a href="/wiki/Opportunity_cost" title="Opportunity cost">opportunity cost</a> for the bank and a reason why the bank could be affected financially. </p><p><a href="/wiki/Currency_risk" class="mw-redirect" title="Currency risk">Currency risk</a> is the risk that foreign exchange rates or the implied volatility will change, which affects, for example, the value of an asset held in that currency. Currency fluctuations in the marketplace can have a drastic impact on an international firm's value because of the price effect on domestic and foreign goods, as well as the value of foreign currency denominate assets and liabilities.<sup id="cite_ref-9" class="reference"><a href="#cite_note-9"><span class="cite-bracket">[</span>9<span class="cite-bracket">]</span></a></sup> When a currency appreciates or depreciates, a firm can be at risk depending on where they are operating and what currency denominations they are holding. The fluctuation in currency markets can have effects on both the imports and exports of an international firm. For example, if the euro depreciates against the dollar, the U.S. exporters take a loss while the U.S. importers gain. This is because it takes less dollars to buy a euro and vice versa, meaning the U.S. wants to buy goods and the EU is willing to sell them; it is too expensive for the EU to import from U.S. at this time. </p><p><a href="/wiki/Commodity_risk" title="Commodity risk">Commodity risk</a> is the risk that commodity prices (e.g. corn, copper, crude oil) or implied volatility will change. There is too much variation between the amount of risks producers and consumers of commodities face in order to have a helpful framework or guide.<sup id="cite_ref-10" class="reference"><a href="#cite_note-10"><span class="cite-bracket">[</span>10<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading3"><h3 id="Model_risk">Model risk</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Financial_risk&action=edit&section=3" title="Edit section: Model risk"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Model_risk" title="Model risk">Model risk</a></div> <p>Financial risk measurement, pricing of financial instruments, and portfolio selection are all based on statistical models. If the model is wrong, risk numbers, prices, or optimal portfolios are wrong. <a href="/wiki/Model_risk" title="Model risk">Model risk</a> quantifies the consequences of using the wrong models in risk measurement, pricing, or portfolio selection. </p><p>The main element of a statistical model in finance is a risk factor distribution. Recent papers treat the factor distribution as unknown random variable and measuring risk of model misspecification. Jokhadze and Schmidt (2018) propose practical model risk measurement framework.<sup id="cite_ref-11" class="reference"><a href="#cite_note-11"><span class="cite-bracket">[</span>11<span class="cite-bracket">]</span></a></sup> They introduce <a href="/w/index.php?title=Superposed_risk_measures&action=edit&redlink=1" class="new" title="Superposed risk measures (page does not exist)">superposed risk measures</a> that incorporate model risk and enables consistent market and model risk management. Further, they provide axioms of model risk measures and define several practical examples of superposed model risk measures in the context of financial risk management and contingent claim pricing. </p> <div class="mw-heading mw-heading3"><h3 id="Credit_risk">Credit risk</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Financial_risk&action=edit&section=4" title="Edit section: Credit risk"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Credit_risk" title="Credit risk">Credit risk</a></div> <p>Credit risk management is a profession that focuses on reducing and preventing losses by understanding and measuring the probability of those losses. Credit risk management is used by banks, credit lenders, and other financial institutions to mitigate losses primarily associated with nonpayment of loans. A credit risk occurs when there is potential that a borrower may default or miss on an obligation as stated in a contract between the financial institution and the borrower.<sup id="cite_ref-12" class="reference"><a href="#cite_note-12"><span class="cite-bracket">[</span>12<span class="cite-bracket">]</span></a></sup> </p><p>Attaining good customer data is an essential factor for managing credit risk. Gathering the right information and building the right relationships with the selected customer base is crucial for business risk strategy. In order to identify potential issues and risks that may arise in the future, analyzing financial and nonfinancial information pertaining to the customer is critical. Risks such as that in business, industry of investment, and management risks are to be evaluated. Credit risk management evaluates the company's financial statements and analyzes the company's decision making when it comes to financial choices. Furthermore, credit risks management analyzes where and how the loan will be utilized and when the expected repayment of the loan is as well as the reason behind the company's need to borrow the loan. </p><p>Expected Loss (EL) is a concept used for Credit Risk Management to measure the average potential rate of losses that a company accounts for over a specific period of time. The expected credit loss is formulated using the formula: </p><p>Expected Loss = Expected Exposure X Expected Default X Expected Severity </p><p>Expected Exposure refers to exposure expected during the credit event. Some factors impacting expected exposure include expected future events and the type of credit transaction. Expected Default is a risk calculated for the number of times a default will likely occur from the borrower. Expected Severity refers to the total cost incurred in the event a default occurs. This total loss includes loan principle and interests. Unlike Expected Loss, organizations have to hold capital for Unexpected Losses. Unexpected Losses represent losses where an organization will need to predict an average rate of loss. It is considered the most critical type of losses as it represents the instability and unpredictability of true losses that may be encountered at a given timeframe.<sup id="cite_ref-13" class="reference"><a href="#cite_note-13"><span class="cite-bracket">[</span>13<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-14" class="reference"><a href="#cite_note-14"><span class="cite-bracket">[</span>14<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-15" class="reference"><a href="#cite_note-15"><span class="cite-bracket">[</span>15<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-16" class="reference"><a href="#cite_note-16"><span class="cite-bracket">[</span>16<span class="cite-bracket">]</span></a></sup> </p> <div class="mw-heading mw-heading3"><h3 id="Liquidity_risk">Liquidity risk</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Financial_risk&action=edit&section=5" title="Edit section: Liquidity risk"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Liquidity_risk" title="Liquidity risk">Liquidity risk</a></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">See also: <a href="/wiki/Liquidity" title="Liquidity">Liquidity</a></div> <p>This is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit). There are two types of liquidity risk: </p> <ul><li><i>Asset liquidity</i> – An asset cannot be sold due to lack of liquidity in the market – essentially a sub-set of market risk. This can be accounted for by: <ul><li>Widening difference between <a href="/wiki/Supply_and_demand" title="Supply and demand">supply and demand</a></li> <li>Making explicit liquidity reserves</li> <li>Lengthening holding period for <a href="/wiki/Value_at_risk" title="Value at risk">VaR</a> calculations</li></ul></li> <li><i>Funding liquidity</i> – Risk that liabilities: <ul><li>Cannot be met when they fall due</li> <li>Can only be met at an uneconomic price</li> <li>Can be name-specific or <a href="/wiki/Systemic_risk" title="Systemic risk">systemic</a></li></ul></li></ul> <div class="mw-heading mw-heading3"><h3 id="Valuation_risk">Valuation risk</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Financial_risk&action=edit&section=6" title="Edit section: Valuation risk"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <div class="excerpt-block"><style data-mw-deduplicate="TemplateStyles:r1066933788">.mw-parser-output .excerpt-hat .mw-editsection-like{font-style:normal}</style><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable dablink excerpt-hat selfref">This section is an excerpt from <a href="/wiki/Valuation_risk" title="Valuation risk">Valuation risk</a>.<span class="mw-editsection-like plainlinks"><span class="mw-editsection-bracket">[</span><a class="external text" href="https://en.wikipedia.org/w/index.php?title=Valuation_risk&action=edit">edit</a><span class="mw-editsection-bracket">]</span></span></div><div class="excerpt"> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1126788409"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1246091330"><table class="sidebar nomobile nowraplinks" style="border:1px solid #B2BEB5"><tbody><tr><td class="sidebar-pretitle" style="background:#ACE1AF">Categories of</td></tr><tr><th class="sidebar-title-with-pretitle" style="background:#ACE1AF;font-size:200%;font-weight:normal;padding-bottom:0.15em;"><a class="mw-selflink selflink">Financial risk</a></th></tr><tr><td class="sidebar-image"><span typeof="mw:File"><a href="/wiki/File:Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg" class="mw-file-description"><img src="//upload.wikimedia.org/wikipedia/commons/thumb/6/61/Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg/100px-Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg" decoding="async" width="100" height="49" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/commons/thumb/6/61/Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg/150px-Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg 1.5x, //upload.wikimedia.org/wikipedia/commons/thumb/6/61/Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg/200px-Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg 2x" data-file-width="500" data-file-height="244" /></a></span></td></tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Credit_risk" title="Credit risk">Credit risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Settlement_risk" title="Settlement risk">Settlement risk</a></li> <li><a href="/wiki/Concentration_risk" title="Concentration risk">Concentration risk</a></li> <li><a href="/wiki/Sovereign_credit_risk" title="Sovereign credit risk">Sovereign risk</a></li> <li><a href="/wiki/Default_(finance)" title="Default (finance)">Default risk</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Market_risk" title="Market risk">Market risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Interest_rate_risk" title="Interest rate risk">Interest rate risk</a></li> <li><a href="/wiki/Inflation_risk" class="mw-redirect" title="Inflation risk">Inflation risk</a></li> <li><a href="/wiki/Currency_risk" class="mw-redirect" title="Currency risk">Currency risk</a></li> <li><a href="/wiki/Equity_risk" title="Equity risk">Equity risk</a></li> <li><a href="/wiki/Commodity_risk" title="Commodity risk">Commodity risk</a></li> <li><a href="/wiki/Volatility_risk" title="Volatility risk">Volatility risk</a></li> <li><a href="/wiki/Systemic_risk" title="Systemic risk">Systemic risk</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Liquidity_risk" title="Liquidity risk">Liquidity risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Refinancing_risk" title="Refinancing risk">Refinancing risk</a></li> <li><a href="/wiki/Deposit_risk" title="Deposit risk">Deposit risk</a></li> <li><a href="/wiki/Margining_risk" title="Margining risk">Margining risk</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Investment_risk" class="mw-redirect" title="Investment risk">Investment risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Model_risk" title="Model risk">Model risk</a></li> <li><a href="/wiki/Execution_risk" class="mw-redirect" title="Execution risk">Execution risk</a></li> <li><a href="/wiki/Valuation_risk" title="Valuation risk">Valuation risk</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Business_risk" class="mw-redirect" title="Business risk">Business risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Reputational_risk" class="mw-redirect" title="Reputational risk">Reputational risk</a></li> <li><a href="/wiki/Operational_risk" title="Operational risk">Operational risk</a></li> <li><a href="/wiki/Country_risk" title="Country risk">Country risk</a></li> <li><a href="/wiki/Political_risk" title="Political risk">Political risk</a></li> <li><a href="/wiki/Legal_risk" title="Legal risk">Legal risk</a></li> <li><a href="/wiki/Moral_hazard" title="Moral hazard">Moral hazard</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Profit_risk" title="Profit risk">Profit risk</a></th></tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Non-financial_risk" title="Non-financial risk">Non-financial risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Stranded_asset" title="Stranded asset">Stranded asset</a></li></ul></td> </tr><tr><td class="sidebar-navbar"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1239400231"><div class="navbar plainlinks hlist navbar-mini"><ul><li class="nv-view"><a href="/wiki/Template:Financial_risk_types" title="Template:Financial risk types"><abbr title="View this template">v</abbr></a></li><li class="nv-talk"><a href="/wiki/Template_talk:Financial_risk_types" title="Template talk:Financial risk types"><abbr title="Discuss this template">t</abbr></a></li><li class="nv-edit"><a href="/wiki/Special:EditPage/Template:Financial_risk_types" title="Special:EditPage/Template:Financial risk types"><abbr title="Edit this template">e</abbr></a></li></ul></div></td></tr></tbody></table> <p><a href="/wiki/Valuation_risk" title="Valuation risk">Valuation risk</a> is the <a href="/wiki/Risk" title="Risk">risk</a> that an entity suffers a loss when trading an <a href="/wiki/Asset" title="Asset">asset</a> or a <a href="/wiki/Liability_(financial_accounting)" title="Liability (financial accounting)">liability</a> due to a difference between the accounting value and the price effectively obtained in the trade. </p><p>In other words, valuation risk is the uncertainty about the difference between the value reported in the <a href="/wiki/Balance_sheet" title="Balance sheet">balance sheet</a> for an asset or a liability and the price that the entity could obtain if it effectively sold the asset or transferred the liability (the so-called "exit price"). </p> This risk is especially significant for financial assets and related marketable contracts with complex features and limited <a href="/wiki/Liquidity" title="Liquidity">liquidity</a>, that are valued using internally developed pricing models. Valuation errors can result for instance from missing consideration of <a href="/wiki/Risk_factors" class="mw-redirect" title="Risk factors">risk factors</a>, inaccurate modeling of risk factors, or inaccurate modeling of the <a href="/wiki/Price_sensitivity" class="mw-redirect" title="Price sensitivity">sensitivity</a> of instrument prices to risk factors. Errors are more likely when models use inputs that are unobservable or for which little information is available, and when financial instruments are illiquid so that the accuracy of pricing models cannot be verified with regular market trades.<sup id="cite_ref-17" class="reference"><a href="#cite_note-17"><span class="cite-bracket">[</span>17<span class="cite-bracket">]</span></a></sup></div></div> <div class="mw-heading mw-heading3"><h3 id="Operational_risk">Operational risk</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Financial_risk&action=edit&section=7" title="Edit section: Operational risk"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <div class="excerpt-block"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1066933788"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable dablink excerpt-hat selfref">This section is an excerpt from <a href="/wiki/Operational_risk" title="Operational risk">Operational risk</a>.<span class="mw-editsection-like plainlinks"><span class="mw-editsection-bracket">[</span><a class="external text" href="https://en.wikipedia.org/w/index.php?title=Operational_risk&action=edit">edit</a><span class="mw-editsection-bracket">]</span></span></div><div class="excerpt"> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1126788409"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1246091330"><table class="sidebar nomobile nowraplinks" style="border:1px solid #B2BEB5"><tbody><tr><td class="sidebar-pretitle" style="background:#ACE1AF">Categories of</td></tr><tr><th class="sidebar-title-with-pretitle" style="background:#ACE1AF;font-size:200%;font-weight:normal;padding-bottom:0.15em;"><a class="mw-selflink selflink">Financial risk</a></th></tr><tr><td class="sidebar-image"><span typeof="mw:File"><a href="/wiki/File:Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg" class="mw-file-description"><img src="//upload.wikimedia.org/wikipedia/commons/thumb/6/61/Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg/100px-Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg" decoding="async" width="100" height="49" class="mw-file-element" srcset="//upload.wikimedia.org/wikipedia/commons/thumb/6/61/Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg/150px-Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg 1.5x, //upload.wikimedia.org/wikipedia/commons/thumb/6/61/Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg/200px-Solidus-Constantius_Gallus-thessalonica_RIC_149.jpg 2x" data-file-width="500" data-file-height="244" /></a></span></td></tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Credit_risk" title="Credit risk">Credit risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Settlement_risk" title="Settlement risk">Settlement risk</a></li> <li><a href="/wiki/Concentration_risk" title="Concentration risk">Concentration risk</a></li> <li><a href="/wiki/Sovereign_credit_risk" title="Sovereign credit risk">Sovereign risk</a></li> <li><a href="/wiki/Default_(finance)" title="Default (finance)">Default risk</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Market_risk" title="Market risk">Market risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Interest_rate_risk" title="Interest rate risk">Interest rate risk</a></li> <li><a href="/wiki/Inflation_risk" class="mw-redirect" title="Inflation risk">Inflation risk</a></li> <li><a href="/wiki/Currency_risk" class="mw-redirect" title="Currency risk">Currency risk</a></li> <li><a href="/wiki/Equity_risk" title="Equity risk">Equity risk</a></li> <li><a href="/wiki/Commodity_risk" title="Commodity risk">Commodity risk</a></li> <li><a href="/wiki/Volatility_risk" title="Volatility risk">Volatility risk</a></li> <li><a href="/wiki/Systemic_risk" title="Systemic risk">Systemic risk</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Liquidity_risk" title="Liquidity risk">Liquidity risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Refinancing_risk" title="Refinancing risk">Refinancing risk</a></li> <li><a href="/wiki/Deposit_risk" title="Deposit risk">Deposit risk</a></li> <li><a href="/wiki/Margining_risk" title="Margining risk">Margining risk</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Investment_risk" class="mw-redirect" title="Investment risk">Investment risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Model_risk" title="Model risk">Model risk</a></li> <li><a href="/wiki/Execution_risk" class="mw-redirect" title="Execution risk">Execution risk</a></li> <li><a href="/wiki/Valuation_risk" title="Valuation risk">Valuation risk</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Business_risk" class="mw-redirect" title="Business risk">Business risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Reputational_risk" class="mw-redirect" title="Reputational risk">Reputational risk</a></li> <li><a href="/wiki/Operational_risk" title="Operational risk">Operational risk</a></li> <li><a href="/wiki/Country_risk" title="Country risk">Country risk</a></li> <li><a href="/wiki/Political_risk" title="Political risk">Political risk</a></li> <li><a href="/wiki/Legal_risk" title="Legal risk">Legal risk</a></li> <li><a href="/wiki/Moral_hazard" title="Moral hazard">Moral hazard</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Profit_risk" title="Profit risk">Profit risk</a></th></tr><tr><th class="sidebar-heading" style="background:#ACE1AF"> <a href="/wiki/Non-financial_risk" title="Non-financial risk">Non-financial risk</a></th></tr><tr><td class="sidebar-content plainlist"> <ul><li><a href="/wiki/Stranded_asset" title="Stranded asset">Stranded asset</a></li></ul></td> </tr><tr><td class="sidebar-navbar"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1239400231"><div class="navbar plainlinks hlist navbar-mini"><ul><li class="nv-view"><a href="/wiki/Template:Financial_risk_types" title="Template:Financial risk types"><abbr title="View this template">v</abbr></a></li><li class="nv-talk"><a href="/wiki/Template_talk:Financial_risk_types" title="Template talk:Financial risk types"><abbr title="Discuss this template">t</abbr></a></li><li class="nv-edit"><a href="/wiki/Special:EditPage/Template:Financial_risk_types" title="Special:EditPage/Template:Financial risk types"><abbr title="Edit this template">e</abbr></a></li></ul></div></td></tr></tbody></table> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1246091330"><table class="sidebar nomobile nowraplinks hlist"><tbody><tr><th class="sidebar-title" style="background: silver">Basel Framework <br /><small>International regulatory standards for banks</small></th></tr><tr><td class="sidebar-content"> <ul><li><a href="/wiki/Basel_Committee_on_Banking_Supervision" title="Basel Committee on Banking Supervision">Basel Committee on Banking Supervision</a></li> <li><a href="/wiki/Basel_Accords" title="Basel Accords">Basel Accords</a> <ul><li><a href="/wiki/Basel_I" title="Basel I">Basel I</a></li> <li><a href="/wiki/Basel_II" title="Basel II">Basel II</a></li> <li><a href="/wiki/Basel_III" title="Basel III">Basel III</a> <ul><li><a href="/wiki/Liquidity_coverage_ratio" class="mw-redirect" title="Liquidity coverage ratio">LCR</a></li> <li><a href="/wiki/Net_stable_funding_ratio" title="Net stable funding ratio">NSFR</a></li> <li><a href="/wiki/Fundamental_Review_of_the_Trading_Book" title="Fundamental Review of the Trading Book">FRTB</a></li> <li><a href="/wiki/Basel_III:_Finalising_post-crisis_reforms" title="Basel III: Finalising post-crisis reforms">Endgame</a></li></ul></li></ul></li></ul></td> </tr><tr><th class="sidebar-heading" style="font-weight: normal; background: silver; padding-bottom: 0.3em;"> Background</th></tr><tr><td class="sidebar-content"> <ul><li><a href="/wiki/Banking" class="mw-redirect" title="Banking">Banking</a> / <a href="/wiki/Bank_regulation" class="mw-redirect" title="Bank regulation">Regulation</a></li> <li><a href="/wiki/Monetary_policy" title="Monetary policy">Monetary policy</a> / <a href="/wiki/Central_bank" title="Central bank">Central bank</a></li> <li><a href="/wiki/Risk" title="Risk">Risk</a> / <a href="/wiki/Risk_management" title="Risk management">Risk management</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="font-weight: normal; background: silver; padding-bottom: 0.3em;"> Pillar 1: Regulatory capital</th></tr><tr><td class="sidebar-content"> <ul><li><a href="/wiki/Capital_requirement" title="Capital requirement">Capital requirement</a> <ul><li><a href="/wiki/Capital_adequacy_ratio" title="Capital adequacy ratio">Capital ratio</a></li> <li><a href="/wiki/Basel_III#Leverage_ratio" title="Basel III">Leverage ratio</a></li> <li><a href="/wiki/Tier_1_capital" title="Tier 1 capital">Tier 1</a></li> <li><a href="/wiki/Tier_2_capital" title="Tier 2 capital">Tier 2</a></li></ul></li> <li><a href="/wiki/Credit_risk" title="Credit risk">Credit risk</a> <ul><li><a href="/wiki/Standardized_approach_(credit_risk)" title="Standardized approach (credit risk)">SA-CR</a></li> <li><a href="/wiki/Internal_ratings-based_approach_(credit_risk)" title="Internal ratings-based approach (credit risk)">IRB</a> <ul><li><a href="/wiki/Foundation_IRB" title="Foundation IRB">F-IRB</a></li> <li><a href="/wiki/Advanced_IRB" title="Advanced IRB">A-IRB</a></li></ul></li> <li><a href="/wiki/Exposure_at_default" title="Exposure at default">EAD</a> <ul><li><a href="/wiki/Standardized_approach_(counterparty_credit_risk)" title="Standardized approach (counterparty credit risk)">SA-CCR</a></li> <li>IMM</li></ul></li> <li><a href="/wiki/Credit_conversion_factor" title="Credit conversion factor">CCF</a></li></ul></li> <li><a href="/wiki/Market_risk" title="Market risk">Market risk</a> <ul><li><a href="/wiki/Standardized_approach_(market_risk)" class="mw-redirect" title="Standardized approach (market risk)">Standardized</a></li> <li><a href="/wiki/Internal_models_approach_(market_risk)" class="mw-redirect" title="Internal models approach (market risk)">IMA</a></li></ul></li> <li><a href="/wiki/Credit_valuation_adjustment" title="Credit valuation adjustment">CVA vol</a> <ul><li><a href="/wiki/XVA#Accounting_impact" title="XVA">BA-CVA</a></li> <li><a href="/wiki/XVA#Accounting_impact" title="XVA">SA-CVA</a></li></ul></li> <li><a href="/wiki/Operational_risk" title="Operational risk">Operational risk</a> <ul><li><a href="/wiki/Basic_indicator_approach" title="Basic indicator approach">Basic</a></li> <li><a href="/wiki/Standardized_approach_(operational_risk)" title="Standardized approach (operational risk)">Standardized</a></li> <li><a href="/wiki/Advanced_measurement_approach" title="Advanced measurement approach">AMA</a></li></ul></li></ul></td> </tr><tr><th class="sidebar-heading" style="font-weight: normal; background: silver; padding-bottom: 0.3em;"> Pillar 2: Supervisory review</th></tr><tr><td class="sidebar-content"> <ul><li><a href="/wiki/Economic_capital" title="Economic capital">Economic capital</a></li> <li><a href="/wiki/Liquidity_risk" title="Liquidity risk">Liquidity risk</a></li> <li><a href="/wiki/Legal_risk" title="Legal risk">Legal risk</a></li></ul></td> </tr><tr><th class="sidebar-heading" style="font-weight: normal; background: silver; padding-bottom: 0.3em;"> Pillar 3: Market disclosure</th></tr><tr><td class="sidebar-content"> <ul><li><a href="/wiki/Corporation#Financial_disclosure" title="Corporation">Disclosure</a></li></ul></td> </tr><tr><td class="sidebar-below" style="font-weight: normal; background: silver"> <a href="/wiki/Portal:Business_and_economics" class="mw-redirect" title="Portal:Business and economics">Business and Economics Portal</a></td></tr><tr><td class="sidebar-navbar"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1239400231"><div class="navbar plainlinks hlist navbar-mini"><ul><li class="nv-view"><a href="/wiki/Template:Basel_Framework" title="Template:Basel Framework"><abbr title="View this template">v</abbr></a></li><li class="nv-talk"><a href="/wiki/Template_talk:Basel_Framework" title="Template talk:Basel Framework"><abbr title="Discuss this template">t</abbr></a></li><li class="nv-edit"><a href="/wiki/Special:EditPage/Template:Basel_Framework" title="Special:EditPage/Template:Basel Framework"><abbr title="Edit this template">e</abbr></a></li></ul></div></td></tr></tbody></table> <p><a href="/wiki/Operational_risk" title="Operational risk">Operational risk</a> is the risk of losses caused by flawed or failed processes, policies, systems or events that disrupt business operations. Employee errors, criminal activity such as fraud, and physical events are among the factors that can trigger operational risk. The process to manage operational risk is known as <a href="/wiki/Operational_risk_management" title="Operational risk management">operational risk management</a>. The definition of operational risk, adopted by the European <a href="/wiki/Solvency_II_Directive" class="mw-redirect" title="Solvency II Directive">Solvency II Directive</a> for insurers, is a variation adopted from the <a href="/wiki/Basel_II" title="Basel II">Basel II</a> regulations for banks: "The risk of a change in value caused by the fact that actual losses, incurred for inadequate or failed internal processes, people and systems, or from external events (including legal risk), differ from the expected losses".<sup id="cite_ref-18" class="reference"><a href="#cite_note-18"><span class="cite-bracket">[</span>18<span class="cite-bracket">]</span></a></sup><sup id="cite_ref-19" class="reference"><a href="#cite_note-19"><span class="cite-bracket">[</span>19<span class="cite-bracket">]</span></a></sup> The scope of operational risk is then broad, and can also include other classes of risks, such as <a href="/wiki/Fraud" title="Fraud">fraud</a>, <a href="/wiki/Security" title="Security">security</a>, <a href="/wiki/Privacy_protection" class="mw-redirect" title="Privacy protection">privacy protection</a>, <a href="/wiki/Legal_risk" title="Legal risk">legal risks</a>, physical (e.g. infrastructure shutdown) or environmental risks. Operational risks similarly may impact broadly, in that they can affect client satisfaction, reputation and shareholder value, all while increasing business volatility. </p><p>Previously, in <a href="/wiki/Basel_I" title="Basel I">Basel I</a>, operational risk was <a href="/wiki/Negative_definition" class="mw-redirect" title="Negative definition">negatively defined</a>: namely that operational risk are all risks which are <i>not</i> <a href="/wiki/Market_risk" title="Market risk">market risk</a> and not <a href="/wiki/Credit_risk" title="Credit risk">credit risk</a>. Some banks have therefore also used the term operational risk synonymously with <a href="/wiki/Non-financial_risk" title="Non-financial risk">non-financial risks</a>.<sup id="cite_ref-Operational_risk_DeloitteNFR_20-0" class="reference"><a href="#cite_note-Operational_risk_DeloitteNFR-20"><span class="cite-bracket">[</span>20<span class="cite-bracket">]</span></a></sup> In October 2014, the Basel Committee on Banking Supervision proposed a revision to its operational risk capital framework that sets out a new standardized approach to replace the basic indicator approach and the standardized approach for calculating operational <a href="/wiki/Regulatory_capital" class="mw-redirect" title="Regulatory capital">risk capital</a>.<sup id="cite_ref-21" class="reference"><a href="#cite_note-21"><span class="cite-bracket">[</span>21<span class="cite-bracket">]</span></a></sup> </p><p>Contrary to other risks (e.g. <a href="/wiki/Credit_risk" title="Credit risk">credit risk</a>, <a href="/wiki/Market_risk" title="Market risk">market risk</a>, <a href="/wiki/Insurance_risk" class="mw-redirect" title="Insurance risk">insurance risk</a>) operational risks are usually not willingly incurred nor are they revenue driven. Moreover, they are not diversifiable and cannot be laid off. This means that as long as people, systems, and processes remain imperfect, operational risk cannot be fully eliminated. Operational risk is, nonetheless, manageable as to keep losses within some level of <a href="/wiki/Risk_tolerance" class="mw-redirect" title="Risk tolerance">risk tolerance</a> (i.e. the amount of risk one is prepared to accept in pursuit of his objectives), determined by balancing the costs of improvement against the expected benefits. Wider trends such as globalization, the expansion of the internet and the rise of social media, as well as the increasing demands for greater corporate accountability worldwide, reinforce the need for proper <a href="/wiki/Risk_management" title="Risk management">risk management</a>. </p><p>Thus <a href="/wiki/Operational_risk_management" title="Operational risk management">operational risk management</a> (ORM) is a specialized discipline within risk management. It constitutes the continuous-process of risk assessment, decision making, and implementation of risk controls, resulting in the acceptance, mitigation, or avoidance of the various operational risks. </p> ORM somewhat overlaps <a href="/wiki/Quality_management" title="Quality management">quality management</a><sup id="cite_ref-22" class="reference"><a href="#cite_note-22"><span class="cite-bracket">[</span>22<span class="cite-bracket">]</span></a></sup> and the <a href="/wiki/Internal_audit" title="Internal audit">internal audit</a> function.</div></div> <div class="mw-heading mw-heading3"><h3 id="Other_risks">Other risks</h3><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Financial_risk&action=edit&section=8" title="Edit section: Other risks"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p><a href="/wiki/Non-financial_risk" title="Non-financial risk">Non-financial risks</a> summarize all other possible risks </p> <ul><li><a href="/wiki/Reputational_risk" class="mw-redirect" title="Reputational risk">Reputational risk</a></li> <li><a href="/wiki/Legal_risk" title="Legal risk">Legal risk</a></li> <li><a href="/wiki/IT_risk" title="IT risk">IT risk</a></li></ul> <div class="mw-heading mw-heading2"><h2 id="Diversification">Diversification</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Financial_risk&action=edit&section=9" title="Edit section: Diversification"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Diversification_(finance)" title="Diversification (finance)">Diversification (finance)</a></div> <p>Financial risk, market risk, and even inflation risk can at least partially be moderated by forms of <a href="/wiki/Diversification_(finance)" title="Diversification (finance)">diversification</a>. </p><p>The returns from different assets are highly unlikely to be perfectly correlated and the correlation may sometimes be negative. For instance, an increase in the <a href="/wiki/Price_of_oil" title="Price of oil">price of oil</a> will often favour a company that produces it,<sup id="cite_ref-Crawley_23-0" class="reference"><a href="#cite_note-Crawley-23"><span class="cite-bracket">[</span>23<span class="cite-bracket">]</span></a></sup> but negatively impact the business of a firm such an airline whose variable costs are heavily based upon fuel.<sup id="cite_ref-Crawley_23-1" class="reference"><a href="#cite_note-Crawley-23"><span class="cite-bracket">[</span>23<span class="cite-bracket">]</span></a></sup> However, share prices are driven by many factors, such as the general health of the economy which will increase the correlation and reduce the benefit of diversification. If one constructs a portfolio by including a wide variety of equities, it will tend to exhibit the same risk and return characteristics as the market as a whole, which many investors see as an attractive prospect, so that <a href="/wiki/Index_fund" title="Index fund">index funds</a> have been developed that invest in equities in proportion to the weighting they have in some well-known index such as the FTSE. </p><p>However, history shows that even over substantial periods of time there is a wide range of returns that an index fund may experience; so an index fund by itself is not "fully diversified". Greater diversification can be obtained by diversifying across asset classes; for instance a portfolio of many bonds and many equities can be constructed in order to further narrow the dispersion of possible portfolio outcomes. </p><p>A key issue in diversification is the <a href="/wiki/Correlation" title="Correlation">correlation</a> between assets, the benefits increasing with lower correlation. However this is not an observable quantity, since the future return on any asset can never be known with complete certainty. This was a serious issue in the <a href="/wiki/Late-2000s_recession" class="mw-redirect" title="Late-2000s recession">late-2000s recession</a> when assets that had previously had small or even negative correlations<sup class="noprint Inline-Template Template-Fact" style="white-space:nowrap;">[<i><a href="/wiki/Wikipedia:Citation_needed" title="Wikipedia:Citation needed"><span title="This claim needs references to reliable sources. (December 2019)">citation needed</span></a></i>]</sup> suddenly starting moving in the same direction causing severe financial stress to market participants who had believed that their diversification would protect them against any plausible market conditions, including funds that had been explicitly set up to avoid being affected in this way.<sup id="cite_ref-24" class="reference"><a href="#cite_note-24"><span class="cite-bracket">[</span>24<span class="cite-bracket">]</span></a></sup> </p><p>Diversification has costs. Correlations must be identified and understood, and since they are not constant it may be necessary to rebalance the portfolio which incurs transaction costs due to buying and selling assets. There is also the risk that as an investor or fund manager diversifies, their ability to monitor and understand the assets may decline leading to the possibility of losses due to poor decisions or unforeseen correlations. </p> <div class="mw-heading mw-heading2"><h2 id="Hedging">Hedging</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Financial_risk&action=edit&section=10" title="Edit section: Hedging"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236090951"><div role="note" class="hatnote navigation-not-searchable">Main article: <a href="/wiki/Hedge_(finance)" title="Hedge (finance)">Hedge (finance)</a></div> <p><a href="/wiki/Hedge_(finance)" title="Hedge (finance)">Hedging</a> is a method for reducing risk where a combination of assets are selected to offset the movements of each other. For instance, when investing in a stock it is possible to buy an option to sell that stock at a defined price at some point in the future. The combined portfolio of stock and option is now much less likely to move below a given value. As in diversification there is a cost, this time in buying the option for which there is a premium. <a href="/wiki/Derivative_(finance)" title="Derivative (finance)">Derivatives</a> are used extensively to mitigate many types of risk.<sup id="cite_ref-25" class="reference"><a href="#cite_note-25"><span class="cite-bracket">[</span>25<span class="cite-bracket">]</span></a></sup> </p><p>According to the article from <i>Investopedia</i>, a hedge is an investment designed to reduce the risk of adverse price movements in an asset. Typically, a hedge consists of taking a counter-position in a related financial instrument, such as a futures contract.<sup id="cite_ref-26" class="reference"><a href="#cite_note-26"><span class="cite-bracket">[</span>26<span class="cite-bracket">]</span></a></sup> </p><p><b>The Forward Contract</b> The <a href="/wiki/Forward_contract" title="Forward contract">forward contract</a> is a non-standard contract to buy or sell an underlying asset between two independent parties at an agreed price and date. </p><p><b>The Future Contract</b> The <a href="/wiki/Futures_contract" title="Futures contract">futures contract</a> is a standardized contract to buy or sell an underlying asset between two independent parties at an agreed price, quantity and date. </p><p><b>Option contract</b> The <a href="/wiki/Option_(finance)" title="Option (finance)">Option contract</a> is a contract gives the buyer (the owner or holder of the option) the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price prior to or on a specified date, depending on the form of the option. </p> <div class="mw-heading mw-heading2"><h2 id="Financial_/_credit_risk_related_acronyms"><span id="Financial_.2F_credit_risk_related_acronyms"></span>Financial / credit risk related acronyms</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Financial_risk&action=edit&section=11" title="Edit section: Financial / credit risk related acronyms"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <p>ACPM - Active credit portfolio management </p><p>EAD - <a href="/wiki/Exposure_at_default" title="Exposure at default">Exposure at default</a> </p><p>EL - <a href="/wiki/Expected_loss" title="Expected loss">Expected loss</a> </p><p>LGD - <a href="/wiki/Loss_given_default" title="Loss given default">Loss given default</a> </p><p>PD - <a href="/wiki/Probability_of_default" title="Probability of default">Probability of default</a> </p><p>KMV - quantitative credit analysis solution developed by credit rating agency Moody's </p><p><a href="/wiki/Value_at_risk" title="Value at risk">VaR</a> - Value at Risk, a common methodology for measuring risk due to market movements </p> <div class="mw-heading mw-heading2"><h2 id="See_also">See also</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Financial_risk&action=edit&section=12" title="Edit section: See also"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <style data-mw-deduplicate="TemplateStyles:r1184024115">.mw-parser-output .div-col{margin-top:0.3em;column-width:30em}.mw-parser-output .div-col-small{font-size:90%}.mw-parser-output .div-col-rules{column-rule:1px solid #aaa}.mw-parser-output .div-col dl,.mw-parser-output .div-col ol,.mw-parser-output .div-col ul{margin-top:0}.mw-parser-output .div-col li,.mw-parser-output .div-col dd{page-break-inside:avoid;break-inside:avoid-column}</style><div class="div-col" style="column-width: 22em;"> <ul><li><a href="/wiki/Arbitrage_pricing_theory" title="Arbitrage pricing theory">Arbitrage pricing theory</a> – Asset pricing theory</li> <li><a href="/wiki/Beta" title="Beta">Beta</a> – Second letter of the Greek alphabet</li> <li><a href="/wiki/Capital_asset_pricing_model" title="Capital asset pricing model">Capital asset pricing model</a> – Model used in finance</li> <li><a href="/wiki/Stranded_asset#Climate-related_asset_stranding" title="Stranded asset">Climate-related asset stranding</a> – Former physical asset, now a liability</li> <li><a href="/wiki/Cost_of_capital" title="Cost of capital">Cost of capital</a> – Cost of a company's funds</li> <li><a href="/wiki/Downside_beta" title="Downside beta">Downside beta</a></li> <li><a href="/wiki/Downside_risk" title="Downside risk">Downside risk</a> – Risk of the actual return being below the expected return</li> <li><a href="/wiki/Insurance" title="Insurance">Insurance</a> – Equitable transfer of the risk of a loss, from one entity to another in exchange for payment</li> <li><a href="/wiki/Macro_risk" title="Macro risk">Macro risk</a> – risk that is associated with macroeconomic, political or environmental factors<span style="display:none" class="category-wikidata-fallback-annotation">Pages displaying wikidata descriptions as a fallback</span></li> <li><a href="/wiki/Model_risk" title="Model risk">Model risk</a> – the potential loss an institution may incur, as a consequence of decisions that could be principally based on the output of internal models, due to errors in the development, implementation or use of such models<span style="display:none" class="category-wikidata-fallback-annotation">Pages displaying wikidata descriptions as a fallback</span></li> <li><a href="/wiki/Modern_portfolio_theory" title="Modern portfolio theory">Modern portfolio theory</a> – Mathematical framework for investment risk</li> <li><a href="/wiki/Optimism_bias" title="Optimism bias">Optimism bias</a> – Type of cognitive bias</li> <li><a href="/wiki/Reinvestment_risk" title="Reinvestment risk">Reinvestment risk</a> – Form of financial risk primarily associated with fixed income securities</li> <li><a href="/wiki/Risk_attitude" class="mw-redirect" title="Risk attitude">Risk attitude</a> – Economics theory<span style="display:none" class="category-annotation-with-redirected-description">Pages displaying short descriptions of redirect targets</span></li> <li><a href="/wiki/Risk_measure" title="Risk measure">Risk measure</a> – concept in financial mathematics that is used to determine the amount of an asset or set of assets to be kept in reserve<span style="display:none" class="category-wikidata-fallback-annotation">Pages displaying wikidata descriptions as a fallback</span></li> <li><a href="/wiki/Risk_premium" title="Risk premium">Risk premium</a> – Measure of excess</li> <li><a href="/wiki/RiskLab" title="RiskLab">RiskLab</a> – Canadian research laboratory</li> <li><a href="/wiki/Stranded_asset" title="Stranded asset">Stranded asset</a> – Former physical asset, now a liability</li> <li><a href="/wiki/Systemic_risk" title="Systemic risk">Systemic risk</a> – Risk of collapse of an entire financial system or entire market</li> <li><a href="/wiki/Upside_beta" title="Upside beta">Upside beta</a></li> <li><a href="/wiki/Upside_risk" title="Upside risk">Upside risk</a> – uncertain possibility of gain in investment<span style="display:none" class="category-wikidata-fallback-annotation">Pages displaying wikidata descriptions as a fallback</span></li> <li><a href="/wiki/Value_at_risk" title="Value at risk">Value at risk</a> – Estimated potential loss for an investment under a given set of conditions</li></ul> </div> <div class="mw-heading mw-heading2"><h2 id="References">References</h2><span class="mw-editsection"><span class="mw-editsection-bracket">[</span><a href="/w/index.php?title=Financial_risk&action=edit&section=13" title="Edit section: References"><span>edit</span></a><span class="mw-editsection-bracket">]</span></span></div> <style data-mw-deduplicate="TemplateStyles:r1239543626">.mw-parser-output .reflist{margin-bottom:0.5em;list-style-type:decimal}@media screen{.mw-parser-output .reflist{font-size:90%}}.mw-parser-output .reflist .references{font-size:100%;margin-bottom:0;list-style-type:inherit}.mw-parser-output .reflist-columns-2{column-width:30em}.mw-parser-output .reflist-columns-3{column-width:25em}.mw-parser-output .reflist-columns{margin-top:0.3em}.mw-parser-output .reflist-columns ol{margin-top:0}.mw-parser-output .reflist-columns li{page-break-inside:avoid;break-inside:avoid-column}.mw-parser-output .reflist-upper-alpha{list-style-type:upper-alpha}.mw-parser-output .reflist-upper-roman{list-style-type:upper-roman}.mw-parser-output .reflist-lower-alpha{list-style-type:lower-alpha}.mw-parser-output .reflist-lower-greek{list-style-type:lower-greek}.mw-parser-output .reflist-lower-roman{list-style-type:lower-roman}</style><div class="reflist"> <div class="mw-references-wrap mw-references-columns"><ol class="references"> <li id="cite_note-1"><span class="mw-cite-backlink"><b><a href="#cite_ref-1">^</a></b></span> <span class="reference-text"><style data-mw-deduplicate="TemplateStyles:r1238218222">.mw-parser-output cite.citation{font-style:inherit;word-wrap:break-word}.mw-parser-output .citation q{quotes:"\"""\"""'""'"}.mw-parser-output .citation:target{background-color:rgba(0,127,255,0.133)}.mw-parser-output .id-lock-free.id-lock-free a{background:url("//upload.wikimedia.org/wikipedia/commons/6/65/Lock-green.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-limited.id-lock-limited a,.mw-parser-output .id-lock-registration.id-lock-registration a{background:url("//upload.wikimedia.org/wikipedia/commons/d/d6/Lock-gray-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .id-lock-subscription.id-lock-subscription a{background:url("//upload.wikimedia.org/wikipedia/commons/a/aa/Lock-red-alt-2.svg")right 0.1em center/9px no-repeat}.mw-parser-output .cs1-ws-icon a{background:url("//upload.wikimedia.org/wikipedia/commons/4/4c/Wikisource-logo.svg")right 0.1em center/12px no-repeat}body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-free a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-limited a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-registration a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .id-lock-subscription a,body:not(.skin-timeless):not(.skin-minerva) .mw-parser-output .cs1-ws-icon a{background-size:contain;padding:0 1em 0 0}.mw-parser-output .cs1-code{color:inherit;background:inherit;border:none;padding:inherit}.mw-parser-output .cs1-hidden-error{display:none;color:var(--color-error,#d33)}.mw-parser-output .cs1-visible-error{color:var(--color-error,#d33)}.mw-parser-output .cs1-maint{display:none;color:#085;margin-left:0.3em}.mw-parser-output .cs1-kern-left{padding-left:0.2em}.mw-parser-output .cs1-kern-right{padding-right:0.2em}.mw-parser-output .citation .mw-selflink{font-weight:inherit}@media screen{.mw-parser-output .cs1-format{font-size:95%}html.skin-theme-clientpref-night .mw-parser-output .cs1-maint{color:#18911f}}@media screen and (prefers-color-scheme:dark){html.skin-theme-clientpref-os .mw-parser-output .cs1-maint{color:#18911f}}</style><cite class="citation web cs1"><a rel="nofollow" class="external text" href="http://www.investopedia.com/terms/f/financialrisk.asp#axzz1b9QLCKIO">"Financial Risk: Definition"</a>. 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"How Important is Financial Risk?". <i>Journal of Financial and Quantitative Analysis</i>. <a href="/wiki/Doi_(identifier)" class="mw-redirect" title="Doi (identifier)">doi</a>:<a rel="nofollow" class="external text" href="https://doi.org/10.2139%2Fssrn.1031910">10.2139/ssrn.1031910</a>. <a href="/wiki/S2CID_(identifier)" class="mw-redirect" title="S2CID (identifier)">S2CID</a> <a rel="nofollow" class="external text" href="https://api.semanticscholar.org/CorpusID:219334657">219334657</a>. <a href="/wiki/SSRN_(identifier)" class="mw-redirect" title="SSRN (identifier)">SSRN</a> <a rel="nofollow" class="external text" href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2307939">2307939</a>.</cite><span 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management</a></div></th></tr><tr><th scope="row" class="navbox-group" style="width:1%">Categories</th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"></div><table class="nowraplinks navbox-subgroup" style="border-spacing:0"><tbody><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Credit_risk" title="Credit risk">Credit risk</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Consumer_credit_risk" title="Consumer credit risk">Consumer credit risk</a></li> <li><a href="/wiki/Sovereign_credit_risk" title="Sovereign credit risk">Sovereign credit risk</a></li> <li><a href="/wiki/Settlement_risk" title="Settlement risk">Settlement risk</a></li> <li><a href="/wiki/Default_(finance)" title="Default (finance)">Default risk</a></li> <li><a href="/wiki/Concentration_risk" title="Concentration risk">Concentration risk</a></li> <li><a href="/wiki/Credit_derivative" title="Credit derivative">Credit derivative</a></li> <li><a href="/wiki/Securitization" title="Securitization">Securitization</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Market_risk" title="Market risk">Market risk</a></th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Commodity_risk" title="Commodity risk">Commodity risk</a> (e.g. <a href="/wiki/Volume_risk" title="Volume risk">Volume risk</a>, <a href="/wiki/Basis_risk" title="Basis risk">Basis risk</a>, <a href="/wiki/Shape_risk" title="Shape risk">Shape risk</a>, <a href="/wiki/Holding_period_risk" title="Holding period risk">Holding period risk</a>, <a href="/wiki/Price_area_risk" class="mw-redirect" title="Price area risk">Price area risk</a>)</li> <li><a href="/wiki/Equity_risk" title="Equity risk">Equity risk</a></li> <li><a href="/wiki/Valuation_risk" title="Valuation risk">Valuation risk</a></li> <li><a href="/wiki/Foreign_exchange_risk" title="Foreign exchange risk">FX risk</a></li> <li><a href="/wiki/Margining_risk" title="Margining risk">Margining risk</a></li> <li><a href="/wiki/Interest_rate_risk" title="Interest rate risk">Interest rate risk</a></li> <li><a href="/wiki/Inflation_risk" class="mw-redirect" title="Inflation risk">Inflation risk</a></li> <li><a href="/wiki/Volatility_risk" title="Volatility risk">Volatility risk</a></li> <li><a href="/wiki/Liquidity_risk" title="Liquidity risk">Liquidity risk</a> (e.g. <a href="/wiki/Refinancing_risk" title="Refinancing risk">Refinancing risk</a>, <a href="/wiki/Deposit_risk" title="Deposit risk">Deposit risk</a>)</li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Operational_risk" title="Operational risk">Operational risk</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Operational_risk_management" title="Operational risk management">Operational risk management</a></li> <li><a href="/wiki/Business_risk" class="mw-redirect" title="Business risk">Business risk</a></li> <li><a href="/wiki/Model_risk" title="Model risk">Model risk</a></li> <li><a href="/wiki/Reputational_risk" class="mw-redirect" title="Reputational risk">Reputational risk</a></li> <li><a href="/wiki/Country_risk" title="Country risk">Country risk</a></li> <li><a href="/wiki/Political_risk" title="Political risk">Political risk</a></li> <li><a href="/wiki/Legal_risk" title="Legal risk">Legal risk</a></li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Other</th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Execution_risk" class="mw-redirect" title="Execution risk">Execution risk</a></li> <li><a href="/wiki/Profit_risk" title="Profit risk">Profit risk</a></li> <li><a href="/wiki/Systemic_risk" title="Systemic risk">Systemic risk</a></li> <li><a href="/wiki/Non-financial_risk" title="Non-financial risk">Non-financial risk</a></li></ul> </div></td></tr></tbody></table><div></div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%"><a href="/wiki/Financial_risk_modeling" title="Financial risk modeling">Modeling</a></th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Arbitrage_pricing_theory" title="Arbitrage pricing theory">Arbitrage pricing theory</a></li> <li><a href="/wiki/Black%E2%80%93Scholes_model" title="Black–Scholes model">Black–Scholes model</a></li> <li><a href="/wiki/Replicating_portfolio" title="Replicating portfolio">Replicating portfolio</a></li> <li><a href="/wiki/Cashflow_matching" title="Cashflow matching">Cash flow matching</a></li> <li><a href="/wiki/Expected_shortfall" title="Expected shortfall">Conditional Value-at-Risk (CVaR)</a></li> <li><a href="/wiki/Copula_(probability_theory)" class="mw-redirect" title="Copula (probability theory)">Copula</a></li> <li><a href="/wiki/Drawdown_(economics)" title="Drawdown (economics)">Drawdown</a></li> <li><a href="/wiki/First-hitting-time_model" title="First-hitting-time model">First-hitting-time model</a></li> <li><a href="/wiki/Immunization_(finance)" title="Immunization (finance)">Interest rate immunization</a></li> <li><a href="/wiki/Market_portfolio" title="Market portfolio">Market portfolio</a></li> <li><a href="/wiki/Modern_portfolio_theory" title="Modern portfolio theory">Modern portfolio theory</a></li> <li><a href="/wiki/Omega_ratio" title="Omega ratio">Omega ratio</a></li> <li><a href="/wiki/Risk-adjusted_return_on_capital" title="Risk-adjusted return on capital">RAROC</a></li> <li><a href="/wiki/Risk-free_interest_rate" class="mw-redirect" title="Risk-free interest rate">Risk-free rate</a></li> <li><a href="/wiki/Risk_parity" title="Risk parity">Risk parity</a></li> <li><a href="/wiki/Sharpe_ratio" title="Sharpe ratio">Sharpe ratio</a></li> <li><a href="/wiki/Sortino_ratio" title="Sortino ratio">Sortino ratio</a></li> <li><a href="/wiki/Survival_analysis" title="Survival analysis">Survival analysis</a> (<a href="/wiki/Proportional_hazards_model" title="Proportional hazards model">Proportional hazards model</a>)</li> <li><a href="/wiki/Tracking_error" title="Tracking error">Tracking error</a></li> <li><a href="/wiki/Value_at_risk" title="Value at risk">Value-at-Risk (VaR)</a> and extensions (<a href="/wiki/Profit_at_risk" title="Profit at risk">Profit at risk</a>, <a href="/wiki/Margin_at_risk" title="Margin at risk">Margin at risk</a>, <a href="/wiki/Liquidity_at_risk" title="Liquidity at risk">Liquidity at risk</a>, <a href="/wiki/Cash_flow_at_risk" class="mw-redirect" title="Cash flow at risk">Cash flow at risk</a>, <a href="/wiki/Earnings_at_risk" title="Earnings at risk">Earnings at risk</a>)</li></ul> </div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Basic concepts</th><td class="navbox-list-with-group navbox-list navbox-even" style="width:100%;padding:0"><div style="padding:0 0.25em"> <ul><li><a href="/wiki/Asset_allocation" title="Asset allocation">Asset allocation</a></li> <li><a href="/wiki/Asset_and_liability_management" title="Asset and liability management">Asset and liability management</a></li> <li><a href="/wiki/Asset_pricing" title="Asset pricing">Asset pricing</a></li> <li><a href="/wiki/Bad_debt" title="Bad debt">Bad debt</a></li> <li><a href="/wiki/Capital_asset" title="Capital asset">Capital asset</a></li> <li><a href="/wiki/Capital_structure" title="Capital structure">Capital structure</a></li> <li><a href="/wiki/Corporate_finance" title="Corporate finance">Corporate finance</a></li> <li><a href="/wiki/Cost_of_capital" title="Cost of capital">Cost of capital</a></li> <li><a href="/wiki/Diversification_(finance)" title="Diversification (finance)">Diversification</a></li> <li><a href="/wiki/Economic_bubble" title="Economic bubble">Economic bubble</a></li> <li><a href="/wiki/Enterprise_value" title="Enterprise value">Enterprise value</a></li> <li><a href="/wiki/Environmental,_social,_and_governance" title="Environmental, social, and governance">ESG</a></li> <li><a href="/wiki/Exchange_traded_fund" class="mw-redirect" title="Exchange traded fund">Exchange traded fund</a></li> <li><a href="/wiki/Expected_return" title="Expected return">Expected return</a></li> <li><a href="/wiki/Finance" title="Finance">Financial</a> <ul><li><a href="/wiki/Financial_adviser" title="Financial adviser">adviser</a></li> <li><a href="/wiki/Financial_analysis" title="Financial analysis">analysis</a></li> <li><a href="/wiki/Financial_analyst" title="Financial analyst">analyst</a></li> <li><a href="/wiki/Financial_asset" title="Financial asset">asset</a></li> <li><a href="/wiki/Financial_betting" title="Financial betting">betting</a></li> <li><a href="/wiki/Financial_crime" title="Financial crime">crime</a></li> <li><a href="/wiki/Financial_engineering" title="Financial engineering">engineering</a></li> <li><a href="/wiki/Financial_law" title="Financial law">law</a></li> <li><a class="mw-selflink selflink">risk</a></li> <li><a href="/wiki/Financial_social_work" title="Financial social work">social work</a></li></ul></li> <li><a href="/wiki/Fundamental_analysis" title="Fundamental analysis">Fundamental analysis</a></li> <li><a href="/wiki/Growth_investing" title="Growth investing">Growth investing</a></li> <li><a href="/wiki/Hazard" title="Hazard">Hazard</a></li> <li><a href="/wiki/Hedge_(finance)" title="Hedge (finance)">Hedge</a></li> <li><a href="/wiki/Investment_management" title="Investment management">Investment management</a></li> <li><a href="/wiki/Risk" title="Risk">Risk</a></li> <li><a href="/wiki/Risk_pool" title="Risk pool">Risk pool</a></li> <li><a href="/wiki/Risk_of_ruin" title="Risk of ruin">Risk of ruin</a></li> <li><a href="/wiki/Systematic_risk" title="Systematic risk">Systematic risk</a></li> <li><a href="/wiki/Mathematical_finance" title="Mathematical finance">Mathematical finance</a></li> <li><a href="/wiki/Moral_hazard" title="Moral hazard">Moral hazard</a></li> <li><a href="/wiki/Risk-return_spectrum" class="mw-redirect" title="Risk-return spectrum">Risk-return spectrum</a></li> <li><a href="/wiki/Speculation" title="Speculation">Speculation</a></li> <li><a href="/wiki/Speculative_attack" title="Speculative attack">Speculative attack</a></li> <li><a href="/wiki/Statistical_finance" title="Statistical finance">Statistical finance</a></li> <li><a href="/wiki/Strategic_financial_management" title="Strategic financial management">Strategic financial management</a></li> <li><a href="/wiki/Stress_test_(financial)" title="Stress test (financial)">Stress test (financial)</a></li> <li><a href="/wiki/Structured_finance" title="Structured finance">Structured finance</a></li> <li><a href="/wiki/Structured_product" title="Structured product">Structured product</a></li> <li><a href="/wiki/Systemic_risk" title="Systemic risk">Systemic risk</a></li> <li><a href="/wiki/Toxic_asset" title="Toxic asset">Toxic asset</a></li></ul> </div></td></tr><tr><td class="navbox-abovebelow" colspan="2"><div> <ul><li><a href="/wiki/Financial_economics" title="Financial economics">Financial economics</a></li> <li><a href="/wiki/Investment_management" title="Investment management">Investment management</a></li> <li><a href="/wiki/Mathematical_finance" title="Mathematical finance">Mathematical finance</a></li></ul> </div></td></tr></tbody></table></div> <div class="navbox-styles"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1129693374"><link rel="mw-deduplicated-inline-style" href="mw-data:TemplateStyles:r1236075235"><style 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