DEFINITION of 'Risk Curve'
A twodimensional plot of real or projected financial harm/risk (vertical axis) versus real or projected financial reward (horizontal axis). Generally speaking, the curve balloons when the underlying item offers greater returns and contracts when it offers lower returns compared to risk.
INVESTOPEDIA EXPLAINS 'Risk Curve'
Risk curves can be plotted using practically anything for variables, as the very existence of a curve tends to suggest a relationship or correlation. A risk curve allows for an instant summation of the risks involved in a particular endeavor, making it very easy to use as a decisionmaking tool.
RELATED TERMS

Systematic Risk
The risk inherent to the entire market or entire market segment. ... 
Risk Seeking
The search for greater volatility and uncertainty in investments ... 
JCurve Effect
A type of diagram where the curve falls at the outset and eventually ... 
Standalone Risk
The risk associated with a single operating unit of a company ... 
Risk Averse
A description of an investor who, when faced with two investments ... 
Risk
The chance that an investment's actual return will be different ...
RELATED FAQS

What is the variance/covariance matrix or parametric method in Value at Risk (VaR)?
The parametric method, also known as the variancecovariance method, is a risk management technique for calculating the value ... Read Full Answer >> 
What is backtesting in Value at Risk (VaR)?
The value at risk is a statistical risk management technique that monitors and quantifies the risk level associated with ... Read Full Answer >> 
How do I discount Free Cash Flow to the Firm (FCFF)?
Discounted free cash flow for the firm (FCFF) should be equal to all of the cash inflows and outflows, adjusted to present ... Read Full Answer >> 
What is RiskMetrics in Value at Risk (VaR)?
RiskMetrics is a methodology that contains techniques and data sets used to calculate the value at risk (VaR) of a portfolio ... Read Full Answer >> 
What are some of the advantages and disadvantages of DuPont Analysis?
DuPont analysis is a potentially helpful tool for analysis that investors can use to make more informed choices regarding ... Read Full Answer >> 
How is risk aversion measured in Modern Portfolio Theory (MPT)?
According to modern portfolio theory, or MPT, degrees of risk aversion are defined by the additional marginal return an investor ... Read Full Answer >>
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