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1) Types of risks in financial markets    

1. : Risk to a firm from having assets and liabilities whose risk exposures do not offset one another.

2. Business risk: The chance that the firm will be unable to cover its operating cost. Level is driven by the firm’s revenue stability and the structure of its operating cost.

3. Corporate risk: reflects uncertainty of the future bottom line of corporate activities. Principal causes of corporate risk are business risk and market risk.

4. Credit Risk: The risk arising from the possibility that the borrower will default.

5. : is a risk associated with fluctuations in one national currency's exchange rate towards that of another country. This type of risk occurs when investing in foreign financial assets and then converting foreign currency into the national currency of the investor. Record bankruptcies and correlated risks have increased institutions' focus on credit risk aggregation and management.

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6. Default Risk: the chance that customers will fail to repay their loans. As mentioned earlier, many consumer finance companies lend to borrowers who are unable to obtain credit from other sources. Naturally, these borrowers tend to default more frequently. Finance company delinquency rates are usually higher than those for banks or thrifts.

7. Event risk: the chance that a totally unexpected event will have a significant effect on the value of the firm or a specific investment.

8. Exchange rate risk: the danger that an unexpected change in the exchange rate between the dollar and the currency in which ...

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