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Risk

Often defined as the standard deviation of the return on total investment. Degree of uncertainty of return on an asset. In context of asset pricing theory. See: Systematic risk.

Risk

The uncertainty associated with any investment. That is, risk is the possibility that the actual return on an investment will be different from its expected return. A vitally important concept in finance is the idea that an investment that carries a higher risk has the potential of a higher return. For example, a zero-risk investment, such as a U.S. Treasury security, has a low rate of return, while a stock in a start-up has the potential to make an investor very wealthy, but also the potential to lose one's entire investment. Certain types of risk are easier to quantify than others. To the extent that risk is quantifiable, it is generally calculated as the standard deviation on an investment's average return.

risk

The variability of returns from an investment. The greater the variability (in dividend fluctuation or security price, for example), the greater the risk. Because investors are generally averse to risk, investments with greater inherent risk must promise higher expected yields.

Risk.

Risk is the possibility you'll lose money if an investment you make provides a disappointing return. All investments carry a certain level of risk, since investment return is not guaranteed.

According to modern investment theory, the greater the risk you take in making an investment, the greater your return has the potential to be if the investment succeeds.

For example, investing in a startup company carries substantial risk, since there is no guarantee that it will be profitable. But if it is, you're in a position to realize a greater gain than if you had invested a similar amount in an already established company.

As a rule of thumb, if you are unwilling to take at least some investment risk, you are likely to limit your investment return.

risk

see UNCERTAINTY AND RISK.

risk

Uncertainty regarding the possibility of loss.

References in periodicals archive ?
Option Ratings After both blocks of the risk game, participants rated each option on a nine-point rating scale according to its valence, arousal and riskiness.
In most cases, though, derivatives (contracted pricing) are utilised to limit riskiness and may be combined with traditional assets to increase risk-adjusted return.
This shift reflected an increase in the riskiness of equity and higher demand for safe assets on the part of emerging market economies because of increased official foreign reserves accumulation.
Minimum private investor participation will now range between 10% and 60% depending on the age and riskiness of the company.
Average tier-l capital at banks went up, but so did the riskiness of their assets, as measured by the risk-weighted assets.
The ECB will take a snapshot of loans and other assets, including holdings of government debt, from the balance sheets of 128 banks at the end of this year and scrutinise their riskiness before it takes over as the bloc's banking supervisor late next year.
They are also the standard against which the riskiness of stocks and bonds are measured.
The core of the planned Basel rule is a requirement that banks hold capital equivalent to at least three per cent of their assets, without any possibility to take into account the riskiness of a lender's investments.
This can be explained by greater tolerance due to familiarity (Greenstein and Hamilton, 1997) or a more accurate assessment of client's riskiness due to improved knowledge (Johnstone and Bedard, 2004).
Perhaps beliefs about issues such as the riskiness of climate change or nuclear power constitute part of what it means for people to belong to specific groups.
This second distorting effect results from pushing interest rates below the natural rate and consequently reducing risk premiums so that there is a collective mis-appreciation of the riskiness of business ventures.
The lack of standardisation in how European banks measure their riskiness is leading to differences in perceptions of investors with respect to investibility of banks, according to a Reuters report.