Introduction
In their research study, Souder & Myles (2010) identify that risk is chiefly fundamental to
investing. Bhringer & Lschel (2008) further add that there is no discussion of returns or
performance that is deemed meaningful in the absence of at least some mention of the
involved risk. However, the trouble for investors, who have just entered into the
marketplace, involves the process of figuring where risk really lies, as well as what the
difference between the various levels of risks. Relating to the manner, in which risk is
fundamental to investments, a significant number of new investors tend to assume that risk
is a well-defined and quantifiable idea. However, it is not the case. As such, a universally
agreed definition of the term, and how it should be measured, has not been attained.
Central to this paper are high-risk investments. It is a form of an investment where there is
a larger percentage chance of capital loss or a high likelihood of underperformance. The
purpose of this paper is to research high-risk investment brokerage firms that have been
indicted or convicted of ethical violations to provide insight and understanding of this
market segment. To realize this objective, the Internet will be used as the chief research
method. The information sources will be derived from academic databases, such as Wiley
Online Library and ProQuest.
The given paper is divided into six sections. The first section will attempt to explain why
investors may be attracted to high-risk investments, such as exchange-traded derivatives,
global funds, and other complex investment vehicles. The second section will concern the
analysis of the risk associated with exchange-traded derivatives, such as futures and
options, and what brokers might do to minimize the risk to investors. The third section will
involve a discussion of the challenges related to regulating a complex global financial
firm, and make suggestions for regulatory improvements. The next section will seek to
analyze the ethical violations of the company researched. The following section will
attempt to discuss the consequences that one believes to be appropriate for the senior
management of the researched firm, and the implications for brokers, trading in high-risk
investments. The end of the assignment will be marked by creating a scenario, where it is
described how the use of high-risk investments would be beneficial for the investor, and a
support for the rationale derived.
Why Investors May Be Attracted to High-Risk Investments
According to Ghosh, Moon, & Tandon (2007), exchange-traded derivatives, global funds,
