What is 'Risk'
The chance that an investment's actual return will be different than expected. Risk includes the possibility of losing some or all of the original investment. Different versions of risk are usually measured by calculating the standard deviation of the historical returns or average returns of a specific investment. A high standard deviation indicates a high degree of risk.
Many companies now allocate large amounts of money and time in developing risk management strategies to help manage risks associated with their business and investment dealings. A key component of the risk mangement process is risk assessment, which involves the determination of the risks surrounding a business or investment.
BREAKING DOWN 'Risk'
A fundamental idea in finance is the relationship between risk and return. The greater the amount of risk that an investor is willing to take on, the greater the potential return. The reason for this is that investors need to be compensated for taking on additional risk.
For example, a U.S. Treasury bond is considered to be one of the safest (riskfree) investments and, when compared to a corporate bond, provides a lower rate of return. The reason for this is that a corporation is much more likely to go bankrupt than the U.S. government. Because the risk of investing in a corporate bond is higher, investors are offered a higher rate of return.

Standard Deviation
1. A measure of the dispersion of a set of data from its mean. ... 
Sharpe Ratio
The Sharpe Ratio is a measure for calculating riskadjusted return, ... 
Target Return
A pricing model that prices a business based on what an investor ... 
Historical Returns
The past performance of a security or index. Analysts review ... 
Appraisal Ratio
A ratio used to measure the quality of a fund's investment picking ... 
Risk Measures
Statistical measures that are historical predictors of investment ...

Bonds & Fixed Income
Understanding The Sharpe Ratio
This simple ratio will tell you how much that extra return is really worth. 
Investing Basics
Low Vs. HighRisk Investments For Beginners
Understanding risk is key to better investing. 
Options & Futures
Financial Concepts: The Risk/Return Tradeoff
The risk/return tradeoff could easily be called the "abilitytosleepatnight test." While some people can handle the equivalent of financial skydiving without batting an eye, others ... 
Professionals
Risk Management Framework (RMF): An Overview
A company must identify the type of risks it is taking, as well as measure, report on, and set systems in place to manage and limit, those risks. 
Investing Basics
How to Use a Benchmark to Evaluate a Portfolio
What is an investment benchmark and how is it used to evaluate the risk and return in a portfolio. 
Markets
The Uses And Limits Of Volatility
Check out how the assumptions of theoretical risk models compare to actual market performance. 
Investing Basics
Mitigating Downside With The Sortino Ratio
Differentiate between good and bad volatility with the Sortino Ratio. 
Mutual Funds & ETFs
Perspectives on the RiskReturn Relationship
By Richard Loth (Contact  Biography)"The history of the stock and bond markets shows that risk and reward are inextricably intertwined. Do not expect high returns without high risk. Do not expect ... 
Bonds & Fixed Income
Find The Highest Returns With The Sharpe Ratio
Learn how to follow the efficient frontier to increase your chances of successful investing. 
Fundamental Analysis
How Investment Risk Is Quantified
FInancial advisors and wealth management firms use a variety of tools based in Modern portfolio theory to quantify investment risk.

What are some of the limitations of only looking at the rate of return for an investment?
Learn why only reviewing the rate of return for an investment poses a risk to the investor and what additional factors should ... Read Answer >> 
How is risk aversion measured in Modern Portfolio Theory (MPT)?
Find out how risk aversion is measured in modern portfolio theory (MPT), how it is reflected in the market and how MPT treats ... Read Answer >> 
What does standard deviation measure in a portfolio?
Dig deeper into the investment uses of, and mathematical principles behind, standard deviation as a measurement of portfolio ... Read Answer >> 
Is there a positive correlation between risk and return?
Learn about the positive correlation between risk and the potential for return, and understand how risk is used to construct ... Read Answer >> 
How can I use expected return with my risk profile to make an investment decision?
Understand the basic concepts of expected returns, risk tolerance and riskadjusted returns, and how investors use these ... Read Answer >> 
What is standard deviation used for in mutual funds?
See how standard deviation is helpful in evaluating a mutual fund's performance. Use it in combination with other measurements ... Read Answer >>