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.

Risk Lover
An investor who is willing to take on additional risk for an ... 
Standard Deviation
1. A measure of the dispersion of a set of data from its mean. ... 
Downside Deviation
A measure of downside risk that focuses on returns that fall ... 
RiskAdjusted Return
A concept that refines an investment's return by measuring how ... 
Risk Premium
The return in excess of the riskfree rate of return that an ... 
Risk Averse
A description of an investor who, when faced with two investments ...

Professionals
Stock Risks
NASAA Series 65: Section 16 Stock Risks. In this section types of risks, quantitative analysis and risk measures associated to stock markets. 
Professionals
Risk And Returns
We define the different types of risk and see how they influence investment returns. 
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
Measuring Portfolio Returns
NASAA Series 65: Section 16 Measuring Portfolio Returns. In this section different types of risk measures discussed and some sample questions. 
Professionals
Risk and Return Measures
Risk and Return Measures 
Professionals
Measuring Portfolio Risks
FINRA/NASAA Series 66: Section 5 Measuring Portfolio Risks. This section discusses different risk measures: Beta, Alpha and the Sharpe Ratio. 
Professionals
Rates of Return  Internal Rate of Return
FINRA/NASAA Series 65  Rates of Return  Internal Rate of Return. In this section Internal rate of return, real return, riskadjusted return, beta and total return. 
Professionals
Introduction
FINRA/NASAA Series 66: Section 2 Measuring Portfolio Returns. This section discusses different return measures: return on investment, holding period, annualized, risk free and total returns. 
Mutual Funds & ETFs
Standard Deviation & Value At Risk
Standard Deviation & Value At Risk 
Investing
Standard Deviation
Learn about how standard deviation is applied to the annual rate of return of an investment to measure the its volatility.

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 the expected market return determined when calculating market risk premium?
Find out how the expected market return rate is determined when calculating market risk premium and how these figures are ... 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 >> 
How is standard deviation used to determine risk?
Understand the basics of calculation and interpretation of standard deviation and how it is used to measure risk in the investment ... 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 >>