Which risk can include the possibility of gain?

Speculative risk is characterized by the potential for both gain and loss. Unlike pure risk, which only involves the chance of loss with no opportunity for profit, speculative risk allows for a scenario where an individual or business could either benefit financially or incur a loss. This type of risk is often associated with investments or entrepreneurial ventures where there is uncertainty regarding the outcome.

For example, investing in stocks embodies speculative risk because there is a possibility of increasing the investment value (gain) or losing money (loss). This dual outcome potential is what sets speculative risk apart from other types of risk, such as pure risk, where only loss is possible without any chance for a positive return. Understanding the nature of speculative risk is crucial for individuals and businesses when evaluating opportunities that involve uncertain outcomes.