RiskMetrics - Event Risk
Understand how to identify event risk, specifically credit risk and liquidity risk
Event risk involves an unexpected and sudden shock that can arise from any general type of risk, such as company defaults, natural disasters, technology failures, human error, political upheavals, or war.
Events are difficult to predict, for obvious reasons: anything could happen. Once an event strikes, however, we know there will be aftershocks. Picture a rock falling into a lake. Risk models can't predict when someone is going to throw the rock in the lake, but they can estimate the ripple effect after impact.