The distinction between “pure risk” and “speculative risk” is important because only pure risks are normally insurable. Why is the distinction between “fundamental risk” and “particular risk” important

Q: Explain what a “riskless hedge” is and how the riskless hedge concept is used in theBlack–Scholes…

A: Riskless hedging: It is the process of buying the stock as well as sell call options simultaneously…

Q: A security with only diversifiable risk has an expected return that exceeds the riskfree rate of…

A: Unsystematic risk is another term for diversifiable risk. The risk that may be quantified and…

Q: Explain the difference between systematic and unsystematic risk. Also explain why one of these types…

A: Financial markets are full of financial risks because these markets are related to the trade of…

Q: An increase in the riskiness of a particular security would NOT affect: Select one: A. The risk…

A: Investors have different options to make investments, and the motive behind investments is to…

Q: Market risk cannot be eliminated. OA. True OB. False

A: The financial market can be defined as the market place which includes the trading of securities and…

Q: Question Details Unsystematic risk is also known as unique risk. asset-specific risk. diversifiable…

A: The objective of the question is to identify the different names by which unsystematic risk is known…

Q: Show that options are riskier than the underlying assets

A: Options are financial instruments that give the holder the right, but not the obligation, to buy or…

Q: A criticism of the CAPM is that it: А. utilizes too many factors. В. ignores the risk-free return C.…

A: CAPM provides an explanation on relationship between systematic risk and expected return on assets.

Q: henew Questiens I a Explain the histoical d efinition Of riski b. Wrat is a bss exposure? C. Hw dues…

A: Risk is frequently mistaken with uncertainty. Uncertainty describes a situation in which the result…

Q: sk is the potential for an investment to generate more than one return. A security that will produce…

A: While investment there are potential risk to the investment due to which return realized vary…

Q: The market efficiency hypothesis claims that, as a rule, the market value and intrinsic value of a…

A: The market  efficiency hypothesis posits that security prices reflect all available information,…

Q: The risk premium of a stock is NOT affected by its ________.A) undiversifiable riskB) market riskC)…

A: There are two types of risk systematic and unsystamatic risk.Systematic risk is associated with with…

Q: According to the CAPM, which of the following risks is irrelevant?   Select one: a. Unsystematic…

A: CAPM stands for Capital Asset Pricing Model. This theoretical model shows the relationship between…

Q: Finaancial risk is not directly associate with..    a) ROE b) EBIT c) EPS d) EAT

A: The Financial risk is a risk of loosing money on am investment or investment opportunities.…

Q: Another name for systematic risk is: Unique risk None of these are correct Diversifiable risk…

A: Systematic risks are related to risk of overall market risk and these are related to whole market…

Q: The APT itself does not provide guidance concerning the factors that one might expect to determine…

A: The forces of APT should associate with important sources of uncertainty, that is., sources of…

Q: Someone who is risk neutral A. does not care about an asset's risk B. places a value on an asset…

A: The term "risk neutral" refers to an individual's mindset when considering investment possibilities.…

Q: Which of the following statements is FALSE? Select one: a. Systematic risk is also known as market…

A: There are two types of risk are present. 1. Systematic risk 2. Unsystematic risk.

Q: How can an investor eliminate Unsystematic Risk?

A: There are two types of risks: 1) Systematic risk 2) Unsystematic risk. Systematic risk is non…

Q: Market risk ________.   a. is equal to the rate of return generated by a risk-free asset b.…

A: By simple diversification the total risk can be reduced but can not be totally eliminated. The…

Classification Of Risk

Risk means when there could be a possibility that the returns expected from a particular project or investment may or may not match the investor's expectations. In other words, the uncertainty of an income arising from a source that would either be lower than expected or result in losses in risk exposure of the project. The higher the risk involved, the higher is the return expected by the investor as the investor is exposed to a high level of risk. There are various methods by which different types of risk can be assessed and avoided or mitigated.