Financial risk

1. Capital asset pricing model.

In the Capital asset pricing model, financial risk means the component of total risk resulting from a firm’s capital structure.

The more net debt there is in the capital structure, the greater the financial risk.

2.

The term 'financial risk' is also used more generally to mean the wider risk of uncertain financial outcomes.

For example the risks arising from not knowing the home currency value of a foreign currency receipt in the future, or the uncertainty regarding the size of future interest payments on floating rate borrowings.

See also

• Asset beta
• Business risk
• Capital asset pricing model
• Equity risk
• Financial asset
• Financial liability
• Financial market price risk
• Financial risk management
• Guide to risk management
• Operational risk
• Return
• Risk
• Risk taxonomy
• Ungeared beta

Other links

Masterclass: Measuring financial risk, Will Spinney, The Treasurer