Question

The risk associated with diversification are _____________.

• A. Country risk
• B. Currency risk
• C. Transmission risk
• D. All of the above
• E. Both (A) and (B) above

Answer 1

The correct option is D All of the above

Integration of financial markets or diversification's is not free of costs. The cost come in the form of certain risks.
1. A currency risk denotes the risk of value of an investment in some other country's currency, coming down in teams of the domestic currency.
2. Country risk is the risk of not being able to disinvest at will due to countries suddenly changing their attitude towards foreign investment, or due to some other factor like war, revolution etc.
3. Transmission risk is the risk of markets going down together in times of a downturn in an economy or in case of any panic among investors.