Pure Risk

What is 'Pure Risk'

Pure risk is a category of risk in which loss is the only possible outcome; there is no beneficial result. Pure risk is related to events that are beyond the risk-taker's control and, therefore, a person cannot consciously take on pure risk.

This is the opposite of speculative risk.

BREAKING DOWN 'Pure Risk'

For example, the possibility that a person's house will be destroyed due to a natural disaster is pure risk. In this example, it is unlikely that there would be any potential benefit to this risk.

There are products that can be purchased to mitigate pure risk. For example, home insurance can be used to protect homeowners from the risk that their homes will be destroyed.

Other examples of pure risk events include premature death, identity theft and career-ending disabilities.

RELATED TERMS
  1. Speculative Risk

    A category of risk that, when undertaken, results in an uncertain ...
  2. Pure Play

    A publicly traded company that is focused on only one industry ...
  3. Clean Float

    Also known as a pure exchange rate, a clean float occurs when ...
  4. Market Risk

    The possibility for an investor to experience losses due to factors ...
  5. Country Risk

    A collection of risks associated with investing in a foreign ...
  6. Pure Discount Instrument

    A type of security that pays no income until maturity; upon expiration, ...
Related Articles
  1. Professionals

    Insurable Risks

    Insurable Risks
  2. Investing

    5 Unique Pure Beta ETNs to Consider (SBV, BCM)

    Learn about five unique Barclays Bank iPath Pure Beta exchange-traded notes (ETNs) and whether these ETNs are suitable for your investment objectives.
  3. Professionals

    Risk Management Framework (RMF): An Overview

    A company must identify the type of risks it is taking, as well as measure, report on, and set systems in place to manage and limit, those risks.
  4. Economics

    Market Economy

    In a market economy, economic decisions and prices are determined by market forces rather than by central planning.
  5. Entrepreneurship

    Why Companies Need Risk Management

    Implementing risk management strategies can save an entire organization from failure. Is yours up to snuff?
  6. Professionals

    Responding to Risks

    Responding to Risks
  7. Professionals

    Types of Investment Risks

    FINRA Series 6: Section 9 Types of Investment Risks. This section explains different types of risks, exchange rate risk, Interest Rate Risk, Business Risk, Credit Risk, Taxability Risk, call ...
  8. Investing Basics

    Understanding Market Risk

    Market risk is the chance that an investment’s value will decrease due to a factor that affects all investments across the market.
  9. Economics

    How to Invest In Developing Markets

    Developing markets can be attractive additions to many investor's portfolios, but carry additional risks that must be considered.
  10. Professionals

    The Risk Premium

    CFA Level 1 - The Risk Premium. This topic covers risk premium, which is a component of required rate of return. Examines business, financial, liquidity and political risk.
RELATED FAQS
  1. What is a pure play?

    A pure play is a company that invests its resources in only one line of business. As such, this type of stock has a performance ... Read Answer >>
  2. What are the major categories of financial risk for a company?

    Examine four major categories of financial risk for a business that represent potential problems that a company may have ... Read Answer >>
  3. What are the primary sources of market risk?

    Learn about market risk and the four primary sources of market risk including equity, interest rate, foreign exchange and ... Read Answer >>
  4. What is the difference between market risk and country risk?

    Learn about market risk and country risk, some examples of each and the main difference between these two types of risks. Read Answer >>
  5. Why should investors be concerned with risk management?

    Learn what risk management is, the difference between systematic and unsystematic risk, and why investors should be concerned ... Read Answer >>
  6. What are some examples of risk management techniques?

    Understand what risk management is in business and why it is a necessary component of ongoing business planning, and review ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center