Financial risk: Difference between revisions
imported>Doug Williamson (Add 3rd definition.) |
imported>Doug Williamson (Update 2nd definition.) |
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The term 'financial risk' is also used more generally to mean the wider risk of uncertain financial outcomes. | 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 | For example, the risks arising from not knowing the future home currency value of a forecast foreign currency receipt, or the uncertainty regarding the size of future interest payments on floating rate borrowings. | ||
Revision as of 14:24, 29 November 2019
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 future home currency value of a forecast foreign currency receipt, or the uncertainty regarding the size of future interest payments on floating rate borrowings.
3.
'Financial risk' can also refer to the financial implications arising from all types of risk.
Including adverse financial implications.
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
