- Country Risk: This risk has recently evolved post the sub prime crisis and refers to the risk that the country would not be conducive and favorable for the carrying out of economic and financial transactions. These types of risk may occur due to political instability along with corruption in the economies. It can also stem in situations in which the balance of payments account of the country is not strong which implies that there exist chances that the Government would be unable to honor its obligations.
The risks discussed above are the primary risks, which are confronted in dealings within the financial market. These categories are by no means exhaustive. Several other types of risks also exist like credit downgrade risk (the risk that there may be a decline in the credit rating which is assigned to the asset by the credit rating agencies), etc.