Risk Profile

Risk profile

The slope of a line graphed according to the value of an underlying asset on the x-axis and the value of a position exposed to risk in the underlying asset on the y-axis. Also used with changes in value. See: Payoff profile.

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Risk profile

A mapping of the change in value or profits and losses to which an organization has exposure.

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risk profile

The degree to which various risks are important to a particular individual.

What questions should I ask myself as I prepare to develop my risk profile?

Ask yourself when you plan to use your investmentin a few years to buy a home, start a business, or pay for college, or in the future for retirement. After you have decided how long your money will work, the focus of your preparation should shift to personal preferences:

1. Is capital preservation more important to you than outpacing inflation?
2. Are you willing to accept fluctuating values when investing for the long term?
3. Are you more comfortable with dividends and income, or with growth through capital appreciation?
4. Will you accept above-average risk to generate above-average returns?

Mark G. Steinberg, President, Trabar Associates, Boston, MA

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Risk Profile

1. A measure of how risk averse an investor is. One may conduct a risk profile to determine what securities will likely fit an investor's investment goals.

2. In options, a chart showing the profits and losses on a contract over time. It is created by plotting the value of the underlying asset on the x-axis and the risk on the y-axis. It is also called a payoff profile.