ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Price risk is the risk that the value of a security or investment will decrease. Factors that affect price risk include earnings volatility, poor business management, and price changes. Diversification is the most common and effective tool to mitigate price risk.

Detailed explanation-2: -The narrow definition of price risk as applied to securities is as follows: The risk that the value of a security (or a portfolio) will decline in the future. Price risk can apply to any financial instrument, commodity, or foreign exchange position.

Detailed explanation-3: -What Are Some Types of Market Risk? The most common types of market risk include interest rate risk, equity risk, commodity risk, and currency risk.

Detailed explanation-4: -Equity Risk: This risk pertains to the investment in the shares. The market price of the shares is volatile and keeps on increasing or decreasing based on various factors. Thus, equity risk is the drop in the market price of the shares.

Detailed explanation-5: -Market risk is the risk of loss due to the factors that affect an entire market or asset class. Market risk is also known as undiversifiable risk because it affects all asset classes and is unpredictable. An investor can only mitigate this type of risk by hedging a portfolio.