Which of the following is considered a static risk in investment analysis?

Which of the following is considered a static risk in investment analysis?

• A. Market trends
• B. Inflation
• C. Fire, flood, etc...
• D. Economic downturn

Answer: (C)

Static risk refers to risks that remain relatively constant and predictable over time, regardless of market fluctuations. In this context, the option regarding fire, flood, or similar natural disasters fits the definition of static risk. These types of risks can be identified and managed through insurance and other risk mitigation strategies. They do not change based on economic conditions or market performance; instead, they represent inherent dangers associated with physical assets. Market trends, inflation, and economic downturns are dynamic risks, meaning they are subject to change and can fluctuate based on various factors affecting the overall economy and investment climate. These types of risks are influenced by external conditions and can vary significantly over time, making them less predictable than static risks.

Static risk refers to risks that remain relatively constant and predictable over time, regardless of market fluctuations. In this context, the option regarding fire, flood, or similar natural disasters fits the definition of static risk. These types of risks can be identified and managed through insurance and other risk mitigation strategies. They do not change based on economic conditions or market performance; instead, they represent inherent dangers associated with physical assets.

Market trends, inflation, and economic downturns are dynamic risks, meaning they are subject to change and can fluctuate based on various factors affecting the overall economy and investment climate. These types of risks are influenced by external conditions and can vary significantly over time, making them less predictable than static risks.