Risk-return trade-off

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Risk-return trade-off

The tendency for potential risk to vary directly with potential return, so that the more risk involved, the greater the potential return, and vice versa.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Risk-Return Trade-Off

The concept that every rational investor, at a given level of risk, will accept only the largest expected return. That is, given two investments at the exact same level of risk, all other things being equal, every rational investor will invest in the one that offers the higher return. The risk-return tradeoff is pervasive throughout economics and finance. It is the reason that riskier bonds pay higher coupons than other bonds. It is also the reason that bonds pay lower returns than most stocks because they are a less risky investment. The Markowitz Portfolio Theory attempts to mathematically identify the portfolio with the highest return at each level of risk. See also: Markowitz Efficient Portfolio.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
A risk vs. reward decision tree shall be set to weigh the level of most effective testing level options and corresponding cost adders.
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Dimension 9: Alignment with Business Risk Tolerance.--Recognizing that there is a process for assessing Risk vs. Reward at the project level and understanding that the elements of risk may include market, product and technical factors, does the Technology Portfolio match the risk tolerance of the business?
Risk vs. Reward. If your cost of goods and your cancel rates are low, promise a full hassle-free, no-questions-asked refund within a specific time frame, (which usually varies by the industry you're in).
Those are then plotted along risk-reward graphs, with the outcomes that best balance risk vs. reward, defining what's called the "efficient frontier."
The report, Cyber Security Strategies: Achieving Cyber Resilience, addresses the "risk vs. reward" aspects of cyberspace, explores the nature of existing and emerging cyber threats, discusses potential common root causes for cyber security breaches and provides guidance on cyber security strategies and approaches organizations should consider adopting.
We constantly have to assess our risk vs. reward to determine if we should implement policies and procedures to help assure that technology becomes a reward for our businesses.
I don't know if the risk vs. reward would have been there.