What is a defining characteristic of speculative risk?

Speculative risk is characterized by the potential for both loss and gain, distinguishing it from pure risk, which only involves the possibility of loss. In speculative risk scenarios, individuals or businesses engage in activities that can lead to financial outcomes that are not guaranteed and may fluctuate. For example, investments in the stock market, real estate ventures, or business startups embody speculative risks as they can lead to profits or losses.

The other choices reflect a misunderstanding of speculative risk characteristics. Guaranteed loss, fixed outcomes, and always resulting in profit are traits that do not align with speculative risk, as this type of risk inherently involves uncertainty and the possibility of varied financial results. By understanding that speculative risk encompasses both the chance of financial loss and the opportunity for financial gain, students can better grasp its fundamental principles within risk management and insurance contexts.