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 ... 
Risk Lover
An investor who is willing to take on additional risk for an ... 
Risk
The chance that an investment's actual return will be different ... 
Risk Averse
A description of an investor who, when faced with two investments ...
Related Articles

Investing Basics
Determining Risk And The Risk Pyramid
Many investors do not understand how to determine the risk level their individual portfolios should bear. 
Options & Futures
What Is Your Risk Tolerance?
Forget the cliches and uncover how much volatility you can really stand. 
Options & Futures
Options Risk Graphs: Visualizing Profit Potential
With a single diagram, you can see how price, time and volatility affect potential gains. 
Options & Futures
Calculating The Equity Risk Premium
See the model in action with real data and evaluate whether its assumptions are valid. 
Fundamental Analysis
The EquityRisk Premium: More Risk For Higher Returns
Learn how the expected extra return on stocks is measured and why academic studies usually estimate a low premium. 
Fundamental Analysis
What are the most common issues with Serial Correlation in stocks?
Read about the concept of serial correlation in stock returns, and learn why market analysts are divided about the efficacy of trading based on stock patterns. 
Bonds & Fixed Income
How do I calculate yield to maturity of a zero coupon bond?
Find out how to calculate the yield to maturity for a zero coupon bond, and see why this calculation is more simple than a bond with a coupon. 
Fundamental Analysis
What does the term 'invisible hand' refer to in the economy?
Discover and understand the concept of the "invisible hand" as explained by Adam Smith, considered the founder of modern economic theory. 
Fundamental Analysis
At what level is the current account deficit considered excessive, in terms of percent?
Take a deeper look at the variables that impact current account deficits, and learn why not all types of deficits have equal impacts on a nation's economy. 
Fundamental Analysis
What is the difference between yield and rate of return?
Read about the differences between yield and rate of return. See why many novice investors often struggle more with the concept of yield.