Which of the following is an example of 'speculative risk'?

Speculative risk refers to situations where there is a possibility of either a gain or a loss. These risks are typically associated with activities that involve uncertainty and are often accepted voluntarily because of the potential for profit. Investing in the stock market perfectly illustrates speculative risk since an investor could experience gains if the market performs well or losses if the market declines. The uncertain nature of stock performance is the essence of speculative risk.

In contrast, purchasing insurance does not represent speculative risk; instead, it is a method of managing risk by transferring it to an insurance company. Owning a business with uncertain income also entails elements of risk, but it is often classified as a business risk or an operational risk rather than speculative. Speculative risks are fundamentally characterized by the potential for both positive and negative outcomes, making investing in the stock market an appropriate example of this type of risk.