ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A speculative risk has the potential to result in a gain or a loss. It requires input from the person looking to assume the risk and is therefore entirely voluntary in nature. At the same time, the result of a speculative risk is hard to anticipate, as the exact amount of gain or loss is unknown.

Detailed explanation-2: -Gambling and investing in the stock market are two examples of speculative risks. Each offers a chance to make money, lose money or walk away even.

Detailed explanation-3: -A speculative risk has three possible outcomes: (1) nothing, (2) a loss or (3) a gain. Accident and illness are pure risks. Examples of speculative risks are gambling and investing.

Detailed explanation-4: -Investing in the stock market is an example of a speculative risk. One can only speculate on whether the investment will produce a profit or a loss. Insuring an automobile is an example of pure risk.

Detailed explanation-5: -In other words a pure risk is a situation that can only end in a loss. For example, the risks of an accident, a car theft or earthquake are pure risks. Speculative risks on the other hand are a family of risks in which some possible outcomes are beneficial.