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.
Next Up
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.
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 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 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. 
Investing
3 Healthy Financial Habits for 2016
”Winning” investors don't just set it and forget it. They consistently take steps to adapt their investment plan in the face of changing markets. 
Investing
How to Ballast a Portfolio with Bonds
If January and early February performance is any guide, there’s a new normal in financial markets today: Heightened volatility. 
Economics
The Truth about Productivity
Why has labor market productivity slowed sharply around the world in recent years? One of the greatest economic mysteries out there. 
Term
How Market Segments Work
A market segment is a group of people who share similar qualities. 
Active Trading
Market Efficiency Basics
Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
RELATED FAQS

What is finance?
"Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >> 
What is the difference between positive and normative economics?
Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >> 
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 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 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 >>