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SPECULATION

Assumption of risk in anticipation of gain but recognizing a higher than average possibility of loss. Speculation is a necessary and productive activity. It can be profitable over the long term when engaged in by professionals, who often limit their losses through the use of various hedging techniques and devices, including options trading, selling, short, stop loss orders, and transactions in futures contracts. The term speculation implies that a business or investment risk can be analyzed and measured, and its distinction from the term investment is one degree of risk. It differs from gambling, which is based on random outcomes.

SPOT MARKET

The immediate market where delivery obligations usually occur no more than 2 days after the transaction.

STABILIZED CONTANGO

Forward contract offered by the South African Reserve Bank to the country’s mines.

SYSTEMIC RISK

The risk inherent to the entire market or entire market segment. Also known as "un-diversifiable risk" or "market risk."

Interest rates, recession and wars all represent sources of systematic risk because they will affect the entire market and cannot be avoided through diversification. Whereas this type of risk affects a broad range of securities, unsystematic risk affects a very specific group of securities or an individual security. Systematic risk can be mitigated only by being hedged. Even a portfolio of well-diversified assets cannot escape all risk.