downside risk

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Downside risk

Risk includes the chance that a security increases or decreases in value unexpectedly. However, most people are concerned with the chance of an unexpected decline - which is known as downside risk.


In technical analysis and fundamental analysis, an estimate of the potential percentage or dollar amount by which a security may fall in the near-term. There are various methodologies used to determine an upside. For example, an analyst may look at recent trends on a bank stock and believe that it has the potential to fall in value by 15% in the next few weeks. This might be an indication for investors to sell the stock. Downside is also known as downside risk. See also: Upside Potential.

downside risk

The potential losses that may occur if a particular investment position is taken. For example, the downside risk from holding Treasury bills is quite small. Compare upside potential.

downside risk

the risk of experiencing losses associated with an investment project and the magnitude of these losses. Managers' attitudes towards UNCERTAINTY will influence their assessment of the desirability of a project which has substantial downside risk.
References in periodicals archive ?
To cope with downside risks, the government is pinning its hopes on an 11 trillion won supplementary budget, which passed the National Assembly on Thursday.
The retailer's risk aversion is transformed to a downside risk constraint presented in this part.
A proposta de Estrada (2000) e mostrar que as medidas de downside risk sao adequadas para mercados emergentes e podem ser compostas com qualquer referencial de retorno disponivel no mercado da seguinte forma:
Forsey describes the Pension Research Institute model designed to estimate downside risk by providing some measurements based on the MAR.
A Bank of Japan official said Friday there are downside risks to the Japanese economy.
It is understandable that business experts would expect firms with international investments to have less downside risk, Leiblein says.
The investor gives up dividends and changes in value on the appreciated stock for the dividends, upside potential and downside risk of another portfolio.
The credit outlook for most euro area countries is stable, balancing the moderate economic recovery under way, which is supported by lower commodity prices and the impact of quantitative easing by the European Central Bank (ECB), with a range of downside risks, Moody's Investors Service says in a new report today.
Governor Stephen Poloz said that the central bank was concerned about low inflation, even though upside and downside risks are balanced.
Areas of downside risk for banks are their exposures to the UK commercial real-estate market and retail and corporate loan exposures in the European peripheral countries," it said.