Definition Of Risk Finance
Different versions of.
Definition of risk finance. Risk involves the chance an investment s actual return will differ from the expected return. A science has evolved around managing market and financial risk under the general title of modern portfolio. Risk measures the uncertainty that an investor is willing to take to realize a gain from an investment. Often it is understood to include only downside risk meaning the potential for financial loss and uncertainty about its extent.
Risk implies future uncertainty about deviation from expected earnings or expected outcome. Risk includes the possibility of losing some or all of the original investment. Financial risk generally relates to the odds of losing money. Treasury security has a low rate of return.
We have liquidity risk sovereign risk insurance risk business risk default risk etc. 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. Financial risk is any of various types of risk associated with financing including financial transactions that include company loans in risk of default.