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.
BREAKING DOWN '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.

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 Averse
A description of an investor who, when faced with two investments ... 
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 ...

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. 
Investing Basics
What Does In Specie Mean?
In specie describes the distribution of an asset in its physical form instead of cash. 
Economics
Calculating Cross Elasticity of Demand
Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another. 
Fundamental Analysis
Emerging Markets: Analyzing Colombia's GDP
With a backdrop of armed rebels and drug cartels, the journey for the Colombian economy has been anything but easy. 
Fundamental Analysis
Emerging Markets: Analyzing Chile's GDP
Chile has become one of the great economic success stories of Latin America. 
Investing
Watch Your Duration When Rates Rise
While recent market volatility is leading investors to look for the nearest exit, here are some suggestions for bond exposure in attractive sectors.

What is the utility function and how is it calculated?
In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >> 
How can I use a regression to see the correlation between prices and interest rates?
In statistics, regression analysis is a widely used technique to uncover relationships among variables and determine whether ... Read Full Answer >> 
How do I calculate a modified duration using Matlab?
The modified duration gauges the sensitivity of the fixed income securities to changes in interest rates. To calculate the ... Read Full Answer >> 
How do I calculate the rule of 72 using Matlab?
In finance, the rule of 72 is a useful shortcut to assess how long it takes an investment to double given its annual growth ... Read Full Answer >> 
How do I calculate the standard error using Matlab?
In statistics, the standard error is the standard deviation of the sampling statistical measure, usually the sample mean. ... Read Full Answer >> 
How do I adjust the rule of 72 for higher accuracy?
The rule of 72 refers to a time value of money formula that investors use to calculate how quickly an investment will double ... Read Full Answer >>