What kind of risk does speculative risk involve?

Speculative risk involves the potential for both gain and loss. This type of risk is characterized by situations where the outcomes can either result in a profit, a loss, or break even. Unlike pure risks, which are associated strictly with loss (such as a house burning down), speculative risks present opportunities for profit along with the possibility of negative outcomes.

For example, investing in the stock market involves speculative risk; an investor may gain if the stock value increases or lose if it decreases. This dual potential for financial outcomes is what distinguishes speculative risk from other types of risks that focus solely on losses or guaranteed results. In business and investment contexts, understanding and managing speculative risks are crucial for strategic decision-making and for capitalizing on opportunities while being aware of potential downsides.

The other options describe outcomes that do not encompass the full nature of risk involved in speculative situations, primarily focusing on loss without recognizing the potential for gain.