Discussion Paper on Types of Risk-Risk
Exposure
The main categories of risk are: pure versus speculative, diversifiable
versus nondiversifiable, and idiosyncratic versus systemic. The first one is
pure versus speculative risk exposures. Pure risk is either has a chance of
loss or no loss at all. There won’t be any chance of having opportunities or
gain in this type of risk. While the speculative risk, it is about an instance
wherein there is chance of loss or gain. There are different types of pure
risk as well: property loss exposures, liability loss exposures, catastrophic
loss exposure, and accidental loss pure exposure and particular pure risk.
The second category of risk is diversifiable versus nondiversifiable.
Diversifiable risks are those that can have their adverse consequences
mitigated simply by having a well-diversified portfolio of risk exposures. In
simple terms, it is about avoiding risks by doing things that doesn’t have
any chance of loss. On the other hand, nondiversifiable risks are assets or
liabilities’ worth that may decrease over a particular timeframe because of
financial changes or different occasions which influence among enormous
segments of the market. And lastly, the idiosyncratic versus systemic. Risks,
which are idiosyncratic (with particular characteristics that are not shared
by all) in nature, are often viewed as being amenable to having their
financial consequences reduced or eliminated by holding a well-diversified
portfolio. These are essential factors that can adversely affect singular or
certain gathering of properties. Something contrary to this type of risk is
the systemic risk which has more extensive patterns that affect the general
monetary framework or an expansive market.
Exposure
The main categories of risk are: pure versus speculative, diversifiable
versus nondiversifiable, and idiosyncratic versus systemic. The first one is
pure versus speculative risk exposures. Pure risk is either has a chance of
loss or no loss at all. There won’t be any chance of having opportunities or
gain in this type of risk. While the speculative risk, it is about an instance
wherein there is chance of loss or gain. There are different types of pure
risk as well: property loss exposures, liability loss exposures, catastrophic
loss exposure, and accidental loss pure exposure and particular pure risk.
The second category of risk is diversifiable versus nondiversifiable.
Diversifiable risks are those that can have their adverse consequences
mitigated simply by having a well-diversified portfolio of risk exposures. In
simple terms, it is about avoiding risks by doing things that doesn’t have
any chance of loss. On the other hand, nondiversifiable risks are assets or
liabilities’ worth that may decrease over a particular timeframe because of
financial changes or different occasions which influence among enormous
segments of the market. And lastly, the idiosyncratic versus systemic. Risks,
which are idiosyncratic (with particular characteristics that are not shared
by all) in nature, are often viewed as being amenable to having their
financial consequences reduced or eliminated by holding a well-diversified
portfolio. These are essential factors that can adversely affect singular or
certain gathering of properties. Something contrary to this type of risk is
the systemic risk which has more extensive patterns that affect the general
monetary framework or an expansive market.
