Asymmetric Risk Exposure

Updated: 09 June 2023

What Does Asymmetric Risk Exposure Mean?

Asymmetric risk exposure refers to a financial situation in which either gains or losses are uncertain because the product involved in the transaction has an unpredictable value. This usually happens in stock trading with call options.

Insuranceopedia Explains Asymmetric Risk Exposure

Certain stocks are volatile. Their value can either go up or down. An investor who buys shares of stocks with an expiration might either sell those shares profitably or at a loss during expiration.

Insurance can also be affected by uncertain market values. An insured who bought a property insurance policy worth 80% of the value of his property (which was the appropriate percentage at the time of the purchase) might realize that the insurer will not entirely cover a loss because the loss happens when the current value of the property (which is the basis for computing a claim) has considerably increased.

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