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 Damage Insurance Corporation

    A government financial protection arm created during World War ...
  2. War Exclusion Clause

    A clause in an insurance policy that specifically excludes coverage ...
  3. War Risk Insurance

    A policy that provides financial protection against losses sustained ...
  4. War Economy

    The organization of a country's production capacity and distribution ...
  5. War Bond

    Debt securities issued by a government for the purpose of financing ...
  6. War Babies

    A name given to securities in companies that are defense contractors. ...
Related Articles
  1. 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.
  2. Fundamental Analysis

    Take On Risk With A Margin of Safety

    More common risk theories can lead to missed opportunities. Find out how margin of safety can propel your portfolio.
  3. Investing Basics

    Determining Risk And The Risk Pyramid

    Many investors do not understand how to determine the risk level their individual portfolios should bear.
  4. Options & Futures

    Managing Interest Rate Risk

    Learn which tools you need to manage the risk that comes with changing rates.
  5. Options & Futures

    Risk Tolerance Only Tells Half The Story

    Just because you're willing to accept a risk, doesn't mean you always should.
  6. Investing Basics

    Introduction To Investment Diversification

    Reducing risk and increasing returns in your portfolio is all about finding the right balance.
  7. Investing

    3 Healthy Financial Habits for 2016

    ”Winning” investors don't just set it and forget it. They consistently take steps to adapt their investment plan in the face of changing markets.
  8. Investing

    How to Ballast a Portfolio with Bonds

    If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility.
  9. Retirement

    Smart Ways to Tap Your Retirement Portfolio

    A rundown of strategies, from what to liquidate first to how much to withdraw, along with their tax consquences.
  10. Stock Analysis

    Are U.S. Stocks Still the Place To Be in 2016?

    Understand why U.S. stocks are absolutely the place to be in 2016, even though the year has gotten off to an awful start for the market.
RELATED FAQS
  1. What protects an investor’s interest in the case of terrorist sabotage, or act of ...

    Currently, most stock ownership is done electronically thru the combined effort of the brokerage firms and the transfer agents ... Read Full Answer >>
  2. What's the difference between a stop and a limit order?

    Different types of orders allow you to be more specific about how you'd like your broker to fulfill your trades. When you ... Read Full Answer >>
  3. Are secured personal loans better than unsecured loans?

    Secured loans are better for the borrower than unsecured loans because the loan terms are more agreeable. Often, the interest ... Read Full Answer >>
  4. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  5. Does mutual fund manager tenure matter?

    Mutual fund investors have numerous items to consider when selecting a fund, including investment style, sector focus, operating ... Read Full Answer >>
  6. Why do financial advisors dislike target-date funds?

    Financial advisors dislike target-date funds because these funds tend to charge high fees and have limited histories. It ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center