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. Products and Investments

    Advisors: Watch Out for Confirmation Bias

    Here's how advisors can make sure that confirmation bias does not color their own perceptions as they manage clients’ portfolios.
  8. Term

    Evaluating Alpha and Beta

    Alpha and beta are risk ratios that investors use to calculate, compare and predict returns.
  9. Fundamental Analysis

    4 Signs It's Time to Fire Your Financial Advisor

    Financial advisors provide valuable advice, but if your advisor communicates poorly, then it may be time to fire them.
  10. Investing Basics

    A Breakdown on How the Stock Market Works

    Learn what it means to own stocks and shares, why shares exist, and how you buy and sell them.
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 Answer >>
  2. What are the advantages and disadvantages of mutual funds?

    Mutual funds are currently the most popular investment vehicle and provide several advantages to investors, including the ... Read Answer >>
  3. Where do investors tend to put their money in a bear market?

    A bearish market is traditionally defined as a period of negative returns in the broader market to the magnitude of between ... Read Answer >>
  4. How can I prevent commissions and fees from eating up my trading profits?

    First off, understand that there is no universal system regarding trading commissions charged by brokerage firms. Some charge ... Read Answer >>
  5. What's the difference between a load and no-load mutual fund?

    A mutual fund is simply a large group of people who lump their money together for a management company to invest. And, like ... Read Answer >>
  6. How does a stop-loss order work, and what price is used to trigger the order?

    A stop-loss order, or stop order, is a type of advanced trade order that can be placed with most brokerage houses. The order ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

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

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

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

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

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center