In what type of risk does a speculative bubble occur?

A speculative bubble occurs in the context of speculative risk, which involves situations where there is both the potential for gain and the possibility of loss. Speculative risks are characterized by uncertainty regarding financial outcomes, and they often arise in markets influenced by investor sentiment, speculation, and herd behavior.

In a speculative bubble, asset prices are driven up beyond their intrinsic value due to overly optimistic expectations. This creates a situation where the risk involved is not just about potential loss, but also includes the chance of significant financial gain, attracting more investment until the bubble eventually bursts. Thus, the correct answer highlights the nature of the risk associated with speculative bubbles—where the outcomes are uncertain, creating both opportunities for profit and substantial potential losses.