Question

Give three examples of risks that cannot be hedged.

Answer 1

Answer-

The three examples of risks that cannot be hedged are

1) Environmental risk - is the risk that arises from various restrictions and sanctions on violating the environmental rules. This risk cannot be hedged as one cannot ancipate this risk

2) Regulatory risk - is the risk that cannot be hedged as this risk is caused by various regulatory authorities in a a specific industry or sector which cannot be assessed beforehand

3) Geopolitical risk - is the risk that is caused by the formations of various new governments or untable political scenarios. This risk cannot be hedged.

4) Risk caused by disasters like hurricanes and pandemics or epidemics - These risks cannot be hedged as they can never be anticipated and causes severe turmoils in economy.