How is speculative risk defined?

Speculative risk is characterized by the potential for both gain and loss, which distinguishes it from pure risk, where only loss is possible. The defining quality of speculative risk is that it involves uncertain outcomes, where one can either benefit from a profit or incur a loss due to various factors, such as investment in the stock market or a business venture. This type of risk is often undertaken voluntarily, as individuals or businesses are seeking opportunities for profit.

In contrast, options that suggest speculative risk is solely uninsurable, completely predictable, or guarantee profit do not accurately capture the essence of what speculative risk entails. Insurance typically covers pure risks, which are more about the possibility of loss without any chance of gain. Thus, the correct choice encompasses the dual nature of risk inherent in speculative scenarios, illustrating the balance between potential reward and potential loss.