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Risk assets

Risk Assets

Risk assets refer to financial assets that carry a significant degree of risk due to their potential for price volatility or the possibility of default. These include equities, commodities, high-yield bonds, and currencies, as well as any other financial instruments where the value is subject to market fluctuations. Investors hold risk assets to seek higher returns, but these investments come with the potential for losses, especially during periods of market instability.

Example

Stocks are considered risk assets because their value can fluctuate significantly based on market conditions, company performance, and economic factors.

Key points

• Assets with a high degree of risk due to price volatility or default potential.

• Includes equities, high-yield bonds, commodities, and currencies.

• Investors seek higher returns but face the risk of losses.

Quick Answers to Curious Questions

Why do investors hold risk assets?

Investors hold risk assets to seek higher returns, accepting the potential for greater volatility and risk.

How do risk assets behave in volatile markets?

Risk assets tend to experience significant price swings during periods of market instability, increasing the potential for both gains and losses.

What factors influence the performance of risk assets?

Economic conditions, market sentiment, company performance, and geopolitical events all impact the value of risk assets.

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