What is a key characteristic of a speculative risk?

A key characteristic of speculative risk is that it can result in either a gain or a loss. This differentiates it from pure risk, which only involves the possibility of loss with no potential for gain. In situations involving speculative risk, individuals or businesses engage in activities that have the potential for both positive and negative financial outcomes.

For example, investing in the stock market is a form of speculative risk, as the investor may gain a profit if the stock value increases or incur a loss if the stock decreases in value. This element of uncertainty surrounding the outcome—where both profit and loss are possible—distinguishes speculative risks from non-speculative ones.