War Risk

DEFINITION of 'War Risk'

1. The possibility that an investment will lose value because of a major, violent political upheaval. War generates uncertainty in the financial markets and causes many investors to panic and sell, which leads to a decline in prices.


2. The possibility that an individual or company will experience a major financial loss related to the destruction of property caused by a major, violent, political upheaval.

BREAKING DOWN 'War Risk'

1. War risk falls under the broader category of political risk, which is one of several types of risk investors face. Others, to name just a few, include liquidity risk (the possibility of being unable to sell), currency risk (the possibility of an investment losing money because of a change in exchange rates) and capital risk (the possibility of losing the principal invested).


2. Terrorism, insurrection, military coup and other war events can create significant losses for personal and business property owners. Standard insurance policies do not always cover acts of war; in some cases, it may be necessary to purchase separate war risk insurance.

RELATED TERMS
  1. War Bond

    Debt securities issued by a government for the purpose of financing ...
  2. Political Risk

    The risk that an investment's returns could suffer as a result ...
  3. Trade War

    A negative side effect of protectionism that occurs when Country ...
  4. Market Risk

    The possibility for an investor to experience losses due to factors ...
  5. Panic Selling

    Wide-scale selling of an investment, causing a sharp decline ...
  6. Property Insurance

    A policy that provides financial reimbursement to the owner or ...
Related Articles
  1. 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.
  2. Bonds & Fixed Income

    War's Influence On Wall Street

    Blitzkrieg? Dawn raids? Sounds like the markets and the battlefield have a few things in common.
  3. Personal Finance

    The Pros And Cons Of Price Wars

    Cheaper prices for the customer may seem great, but aggressive price cutting has a downside.
  4. Markets

    Economic Conditions That Helped Cause World War II

    Dire economic conditions following the First World War intensified antagonisms between nations that would eventually lead to the outbreak of World War II.
  5. Forex Education

    What Is A Currency War And How Does It Work?

    We look at what a currency war is, what factors may lead to it, the impacts of such a strategy, and whether there is a currency war currently.
  6. Active Trading

    4 Commodities Affected By World Conflicts

    What happens to commodities when political disagreements lead to war?
  7. Investing News

    Disney's Star Wars Effect by the Numbers

    The latest Star Wars movie is already breaking records in advance ticket sales. This is good news for Disney's earnings next quarter.
  8. Fundamental Analysis

    Will Star Wars Be Killed By Its Own Hype? (DIS, HAS)

    As Dec. 18 draws near, the expectations around Star Wars are ballooning. Will the movie franchise be able to live up to expectations?
  9. Economics

    What's a Political Economy?

    Economics and politics are intrinsically linked. An economy is frequently one of the biggest points of contention between different political parties. And a political party’s ideologies will ...
  10. Investing

    Impact Investing Funds: What are the Risks?

    Impact investing funds can carry risks unique to this asset class, including political risk, currency risk and exit risk.
RELATED FAQS
  1. What does "buy on the cannons, sell on the trumpets" mean?

    All the events and news that happen around the world can have a great impact on the stock market. Very often, if a war breaks ... Read Answer >>
  2. What is political risk and what can a multinational company do to minimize exposure?

    For multinational companies, political risk refers to the risk that a host country will make political decisions that will ... Read Answer >>
  3. Why does the IRS withhold income taxes from employee paychecks?

    In the midst of WWII, the U.S. government ran into trouble funding the war effort. The problem did not originate from citizens ... Read Answer >>
  4. Why are mutual funds subject to market risk?

    Find out why mutual funds, like all investments, are subject to market risk, including how the different types of market ... Read Answer >>
  5. 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 >>
  6. What are the key differences between financial risk and business risk to a company?

    Understand the difference between a company's financial risk and its business risk, along with some of the factors that affect ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center