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Credit risk The risk that counterparty will not be able to discharge its contractual obligations vis-à-vis investors, it arises from the possibility of the issuer of the Securities to default in the payment of dividend, interest coupons etc.
Political risk Arises from unforeseen political events such as regulatory changes or government instability etc that may cause an issuer to default on its obligations
Liquidity risk Is associated with the ease with which the Investor can liquidate its investments. The more liquid a security is the less the liquidity risk
Inflation risk Refers to the possibility of the inflation rate exceeding the Investor's expectations and thereby eroding the actual value of capital invested.
Exchange rate risk Refers to the risk from unfavourable changes in the exchange rate of a currency in which a financial instrument in which investments have been made is valued.
Interest rate risk Refers to the risk from unwanted changes in the interest rates and their impact on the current value of expected future cash flows of an investment.
Systemic (non-diversifiable) Risk This is a risk of change in the value of a financial instrument due to specific factors relating to the nature of the market.
Non-Systemic (Diversifiable) Risk Refers to the risk associated with the choice of a particular Security, subject to the Issuer's economic performance, the sector of the economy in which it operates etc.
Market Risk The risk derived from unwanted changes in general market conditions, such as interest rates, share and index prices, exchange rates, commodity prices and commodity indexes, fluctuations in variability.
Management Risk Risk which depends on the investment strategy followed or on the investor's ability to engage in best management practices.
Legal Risk There is a risk that contracts have not covered all product characteristics and value at maturity clearly and in detail. This may occur in OTC transactions whereas this risk has almost been removed on regulated markets.
Operation Risk The risk from factors such as human, systems and procedures. For example, it covers the risk of an order being executed wrongly or not on time by a broker or the risk of the trading system or the derivatives clearing system collapsing
Basis Risk The risk of deviation in the price of derivatives from the relevant prices of the corresponding underlying assets due to conditions or operating rules of the derivatives market or the underlying assets market.
Especially for transactions in derivatives, the following should be noted: The Risk in investing in derivative products arises from the imperfect relationship between the movement of Options, Rights, Warrants and Derivative Products with the underlying Securities or the Securities that are set as margin. Also, in the case of Derivative products, there is no certainty as to the existence of a secondary market on a continuous basis for each derivative contract. It should also be noted that in case the investor has made the wrong projections about the market, the amount of potential loss is infinite.
 

 

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Risk Warning: Trading in financial instruments may result in losses as well as profits. Past performance is no guarantee of future results. Trading in derivatives (e.g. options, futures, swap contracts) could result to the loss of the whole capital invested. Derivatives are bilateral contracts whose value depends upon the value of an underlying asset or index. Trading in leveraged financial instruments may result in losses greater than the initial invested capital. You should only invest in derivatives or leveraged financial instruments if you posses the necessary knowledge and experience to understand the risks involved, the investment meets your investment objectives and you are financially able to bear the investment risks.  For further information on risks inherent in investing, click here.