Financial risk

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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. Risk identification.

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. Adverse financial implications.

'Financial risk' can also refer to the financial implications arising from all types of risk.

Especially adverse financial implications.

See also

Other link

Masterclass: Measuring financial risk, Will Spinney, The Treasurer