What is speculative risk?

Speculative risk is best defined as the type of risk that is associated with investment and pricing decisions, where there is a possibility of loss or gain. Unlike pure risk, which involves situations that can only result in a loss (such as a fire or theft), speculative risk encompasses scenarios where individuals or organizations take on risk with the anticipation of a favorable outcome.

In the context of investments, individuals or companies may invest in stocks or commodities with the expectation that their value will increase, but there is always the potential for financial loss. Pricing decisions can also introduce speculative risk, as businesses must carefully consider market demand and competitive pricing, which can fluctuate and impact profitability.

Therefore, the nature of speculative risk is tied to uncertainty and the pursuit of profit as part of a calculated decision-making process, making it distinct from the other options, which focus on either unavoidable losses or outcomes that do not involve potential gains.