Financial markets have a strongly volatile character. The prices of the traded instruments are influenced by many and diverse factors, which, among others, are: changes in the ratio of demand and supply; world trade; tax, monetary, regulatory and international policy of the countries; important economic and political news, changes in the interest rate levels; operations of the central banks and the big players, devaluation of the currencies; beliefs and expectations, as well as many other factors.
The regulated security markets may impose price limitations regarding the traded securities, as well as may suspend a given stock issue from trading. Deltastock Inc warns its clients that in some cases the investor may acquire financial and other additional responsibilities, as a result of trades with financial instruments, including unpredicted responsibilities, additional to the expenses for acquisition of instruments.
Margin trading - the use of „leverage“ multiplies both profit and loss and relatively small market movements may have a large effect on the clients positions. As a result, the funds deposited, to secure open positions, may be fully exhausted. The minimum size of the security deposit, expressed in percentage, for the different types of financial instruments is shown in the Tariff of Interest Rates, Fees and Commissions of Deltastock AD.
| R1 | there are no fluctuations in the value of the investment, except the usual risk; |
| R2 | slight fluctuations in the value of the investment (up to 10% annually, but higher fluctuations are possible); |
| R3 | average level of fluctuations in the value of the investment (over 10% annually, where in some cases the complete loss of the invested capital is possible); |
| R4 | speculative investment, which may lead to the complete loss of the invested capital, because the client strives to take advantage of the high profit potential; |
| R5 | extremely risky investment, which may involve further financial risks for the client in addition to the complete loss of the invested capital. |
| Foreign Currency | R5 |
| Foreign Currency swaps | R5 |
| Foreign Currency option-buy | R4 |
| Foreign Currency option-sell | R5 |
| CFDs based on shares | R5 |
| CFDs based on indices | R5 |
| CFDs based on futures of commodities | R5 |
| Futures | R5 |
| Government bonds | R2 |
| Bonds with a rating А-ААА | R2 |
| Corporate bonds with a rating no less than BBB- | R3 |
| Corporate bonds without rating | R4 |
| Bonds with a rating lower than BBB- | R4 |
| Shares of companies with a rating higher than BBB- | R3 |
| Shares traded on the regulated market | R4 |
| Shares which are not traded on the regulated market | R5 |
| Shares with a rating lower than B- | R5 |
| Shares with a rating В - ВВВ- | R4 |
Except the specific risks for every financial instrument mentioned above, there are general risks which influence every financial instrument and every investment.
The market risk is the risk of loss in value of the investment due to the movements of the market factors - prices and financial instruments, interest rates, currency exchange rates and others. The market prices of the investors may vary due to changes in the economic and market environment, the money policy of the central banks, the business activity of the issuers, the demand and supply of the market of the respective instrument.
This is the risk of the changes in the market interest rates having an unfavourable effect on the profit or the value of the instrument. The changes in the interest rate levels may endanger the financial instruments owners with the risk of capital loss. The impact of the risk is different for the respective financial instruments.
The investments in instruments, denominated in a foreign currency, may be unfavourably affected by the lowering of the exchange rate of this currency against another. The increase or decrease in the currency exchange rates may cause losses or profits for the securities in the currency they are denominated in.
This is the risk for investors in a given bond not to be able to find the same investment market conditions, if a given investment has been ceased, in the event that the issuer of the bond pays its obligation before the maturity date.
This is the risk from direct or indirect losses as a result of inadequate internal control, a human action, organization or external event. This risk covers human errors, intentional damage by employees, crash of the information systems, problems connected to the managing of human resources, company lawsuits, as well as external events such as accidents, fires, floods and others.
The liquidity risk arises in situations, in which a party interested in selling a given asset, is unable to do so, because no one on the market is willing to trade with this asset. There is demand but no supply or vice versa.
This is the risk connected with the price movements of a given financial instrument. The volatility is high, if the financial instrument is subject to large price fluctuations in a given period of time. The risk of volatility is calculated as the difference between the lowest and highest prices of financial instruments for the given period of time.
This is the possibility that the contracting party may not fulfil willingly or may not be able to fulfil the obligations as agreed upon in the contract. The investors need to assess the quality of the issuers of financial instruments, as well as their ability to repay their obligations.
This risk is connected with the location of the market of the respective asset. When the market is not located in the investor’s country of residence, he/she undertakes a currency risk.
External Markets: Every investment, which contains a foreign element, is subject to the risks of that market. These risks may be different from those of the market where the financial instrument is issued or where the investor operates.
Developing markets: The investments in developing markets carry risks not always present in the developed markets. These risks exist also when a large part of the issuer's business is performed on those markets.
The investments in these markets often have a speculative character. The investments in the developing markets must be thought out carefully and the different risks existing in the given markets must be assessed.
This is the risk that a settlement in a payment system may not be realized, due to the inability of a participant in the payment system to fulfil its obligations. This risk is equal to the difference between the price of a given asset and the theoretical date of execution and the price of the asset on the date of execution. This is the difference between the settlement price approved for the financial instrument and the current market price at the time of settlement when the difference may lead to loss.
In some situations the settlement procedure may be influenced by the number of transactions and in this way may prevent their execution. The impossibility for the settlement to be fulfilled due to similar problems may prevent the investors from advantageous investment opportunities and may lead to loss.
The settlement risk may arise both as a credit and a liquidity risk.
This kind of risk arises for the investments in a given market, mostly in the developing markets, on which the rules and regulations concerning the system of custody services may be less developed in the area of investor protection compared to those markets which have strict custody rules. The assets on these markets entrusted to the custodians, where such are necessary, may be subject to risks connected with the impossibility of the custodian to perform his obligations. This risk is magnified when there is no system for investor compensation on the respective market, or, if such a system exists, a given investor is not covered by the protection offered by the system.
The risk from insecurity as a result of legal actions or insecurity regarding the applicability of contracts, legal or sub-legal acts, for instance, lawfulness of the contract, legal authorization of the party to enter into contract.
This is the risk of the government imposing new taxes, regulative or legal obligations or restriction on financial instruments, which a given investor already possesses. For example, the government may decide to prohibit asset repatriation from the country.
Trading with financial instruments hides considerable risks and is not suitable for every investor. Trading on the financial markets is not suitable for investors seeking a stable income, because the profits from such an activity are irregular and unstable.