Which of the following defines speculative risk?

Speculative risk is characterized by the potential for both gain and loss, unlike pure risk, which only presents the possibility of loss. This type of risk occurs in situations where outcomes can vary widely, leading to opportunities for profit or the possibility of incurring a loss. For example, investing in stocks, starting a business, or gambling are all scenarios that involve speculative risk because they offer the chance to gain or lose money.

Other types of risks mentioned do not align with the definition of speculative risk. The notion that a risk can only result in a total loss describes pure risk, which involves a loss with no potential for profit. Similarly, a risk being completely avoidable suggests that it can be eliminated entirely, which again does not apply to speculative risks that inherently involve uncertainty. Lastly, risks that are mandated by law refer to obligations that are required by legislation, which do not fit within the speculative framework that involves voluntary activities with uncertain financial outcomes.