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Definition of 'Price Risk'
The risk of a decline in the value of a security or a portfolio. Price risk is the biggest risk faced by all investors. Although price risk specific to a stock can be minimized through diversification, market risk cannot be diversified away. Price risk, while unavoidable, can be mitigated through the use of hedging techniques.
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Investopedia explains 'Price Risk'
Price risk also depends on the volatility of the securities held within a portfolio. For example, an investor who only holds a handful of junior mining companies in his or her portfolio may be exposed to a greater degree of price risk than an investor with a well-diversified portfolio of blue-chip stocks. Investors can use a number of tools and techniques to hedge price risk, ranging from relatively conservative decisions such as buying put options, to more aggressive strategies including short-selling and inverse ETFs.
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