event risk

Event risk

The risk that the ability of an issuer to make interest and principal payments will change because of rare, discontinuous, and very large, unanticipated changes in the market environment such as (1) a natural or industrial accident or some regulatory change or (2) a takeover, or corporate restructuring.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Event Risk

The risk that an unpredictable, non-repeating event will cause a loss. A strike at a factory or an accident that renders a mine inoperable are examples of event risk. Insurance is intended to lessen many event risks.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

event risk

The risk that some unexpected event will cause a substantial decline in the market value of a security. For example, a leveraged buyout that entails huge amounts of new debt will cause a decline in the market value of the target company's outstanding debt.
Case Study The September 11, 2001, terrorist attacks with hijacked airliners on New York's World Trade Center and Washington's Pentagon caused death and destruction on a monumental scale. The tragic events also had an effect on numerous businesses, including insurance companies, hotels, cruise lines, and brokerage and investment banking firms that conducted much of their activities from the impacted area of New York City. Trading of stocks in the United States was halted from September 11 until September 17. On a national scale no industry was affected more than commercial airlines. Four large passenger jets lost to suicidal terrorists were only the tip of the iceberg for an industry that was already on a downward economic slide. The hijackings on the morning of September 11 caused the Federal Aviation Administration to ban all commercial airline traffic in the United States for most of three days, an expensive proposition for airlines that experts estimated did business at a quarter of a billion dollars daily. The airlines were already experiencing a major decline in profitable business travel, and the hijackings caused fearful leisure travelers to cancel existing bookings and reduce their own airline travel. Analysts were expecting industry losses in 2001 of $2.5 to $3.5 billion prior to the attack. Following the attack these estimates ranged upward to $5 billion with some forecasts of several industry bankruptcies. One smaller firm, North Carolina-based Midway Airlines, threw in the towel and permanently shut down all of its operations on the day following the terrorist attack. Continental Airlines was the first airline to announce large layoffs of 12,000 employees. Other airlines soon followed with employment and schedule reductions of their own at the same time as they requested billions of dollars in federal financial assistance. Airlines incur substantial fixed expenses, including salaries and lease payments, that must be taken care of regardless of how many people purchase tickets. High fixed costs mean that reduced load factors (a smaller percentage of filled seats by paying passengers) have a major impact on the firms' income. When equity markets reopened on Monday following the disaster, airline stock declines from the prior Monday included 52% for US Airways, 49% for Continental, 44% for Delta, 42% for UAL (parent of United Airlines), and 39% for AMR (parent of American Airlines). One terrible event resulted in unexpected financial distress and extensive shareholder losses in an already troubled industry.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
CaPre is indicated for adverse cardiovascular event risk reduction in patients with elevated levels of certain lipids, a big market of ~80M Americans, Zavoico tells investors in a research note.
Moody's also assigned a 'low' assessment to the country's susceptibility to event risk driven by domestic political risk and banking sector risk.
THE CURRENT STUDY DATA are "robust" and suggest a strong association between high-sensitivity cardiac troponin values and cardiovascular event risk in these C0PD patients, according to authors of an editorial.
THIS STUDY OFFERS NEW INSIGHTS into the relationships between endogenous hormones and how they influence cardiovascular event risk, according to Virginia M.
New York: A successful campaign by Xerox Corporation's two largest individual shareholders, Carl Icahn and Darwin Deason, to scuttle the company's plan to combine with its Fuji Xerox joint venture (JV) poses incremental event risk to Xerox's 'BBB-' Issuer Default Rating (IDR), according to Fitch Ratings.
'The stable outlook on Argentina's B2 ratings balances Argentina's credit strengths of its large, diverse economy and moderate income levels against the credit challenges posed by still-high fiscal deficits and a reliance on external financing, which increases its vulnerability to external event risk," Moody's said.
Moody's today lowered its Macro Profile for Lebanon's banking system to "Very Weak +, from Weak --, to reflect a higher susceptibility to event risk reflecting increased political risk and a lower assessment for institutional strength for the country based on World Bank's World-Wide Governance Indicators.
As for event risk, Moody's points out that the risk of senior executives
The change in outlook to stable from negative reflects Moody's view that, while large, concentrated related-party risks continue to leave the bank susceptible to event risk related to the Dubai government and constrain the bank's standalone rating, the overall improving Dubai operating environment moderates the risk of related credit events over the outlook horizon.
The high rating reflects a very high per capita Gross Domestic Product (GDP)--the latest figure for which is US$55,075; a Debt-to-GDP ratio of 22.4% at the end of 2013, which is a comparatively low debt burden viewed against other rated jurisdictions; a high score for governance indicators along with its political connection to the United Kingdom; and a very low susceptibility to event risk, said Minister for finance and economic development Marco Archer.
Moody's Investors Service says that Bulgaria's Baa2 government bond rating and stable outlook reflect its moderate levels of economic and institutional strength as well as high government financial strength, which contribute to the country's moderate susceptibility to event risk.
In its special comment entitled Gulf Banks: Structural Challenges and Event Risk Constrain Asset Quality, Moody's speaks of the 'elevated event risk' and 'structural asset-quality challenges' that banks continue to