Event Risk
The risk that a specific identifiable occurrence causes a sudden large move in a security's price.
How it is identified
Test: a scheduled or plausible discrete event exists whose outcome would materially change the security's value
Unit
qualitative
In depth
Event risk is discrete rather than continuous, so it is poorly captured by volatility measures built on daily returns — a stock can be quiet for months and then gap 20% on a regulatory decision. Scheduled events such as results and policy meetings can be managed by reducing exposure beforehand; unscheduled ones such as a fraud disclosure cannot. Options are the natural instrument for managing it, which is why implied volatility rises ahead of known events and collapses afterwards. For a single-stock position, event risk is the practical form that unsystematic risk takes.
Worked example
A stock with 24% annualised volatility, implying typical daily moves near 1.5%, gaps 22% on an adverse regulatory order. That single day is fifteen times a normal move and no volatility estimate anticipated it.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Event Risk” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.