Financial risk

As financial risks, the risks of a business are referred to, which have their origin in the financial sector. Financial risks are

• Market risk: The risk of financial loss due to the change in market prices such as interest rates or exchange rates.
• Default risk (credit risk): the risk of financial loss due to the failure ( bankruptcy ) of a borrower.
• Liquidity risk: The risk may enter into transactions for insufficient market liquidity only on unfavorable terms, and thereby incur losses (market liquidity risk).
• Being able to raise the risk needed cash or only at a higher price (liquidity risk in the narrow sense or refinancing risk).

Market price risk, credit risk and market liquidity risk are among the success or income risks, since they have a negative effect on the profit of a company if they are striking. The refinancing risk can also affect income as a risk if the cost of procurement of liquidity increase for a company. Most, however, raised the risk of insolvency and refinancing risk is then not counted as income risk.

Financial risks are especially accepted by banks.

• Financial risk