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Describe the three types of project risk. Which type is theoretically the most relevant? Why?

Describe the three types of project risk. Which type is theoretically the most relevant? Why?
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Answer #1

3 type of project risks are
1.Stand Alone risk: The risk due to variability of the expected returns of project is called stand alone risk.
2. Corporate Risk: Since the project is one of the many projects undertaken by the corporate risk can be minimized by virtue of diversification of the project. This risk is lower than the overall risk of standalone risk.
3. Market Risk: It is un-diversified risk or the risk of the market. The risk due to interest rate, inflation,taxes,etc which is for the total market creates un diversified risk.



Market Risk is the most important risk because it directly impacts fluctuations of price of stock price. Higher the market risk more variation is observed in stock prices.

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