| Risk |
The possibility of loss, injury, or other adverse or unwelcome circumstance; a chance or situation involving such a possibility. In finance, risk refers to the chance that an investment's actual return will be different than expected. |
| Management |
The process of dealing with or controlling things or people. In finance, management refers to the processes, procedures and systems used by an organization to manage its financial operations, such as budgeting, accounting, financial reporting, and investing. |
| Probability |
The extent to which something is probable; the likelihood of something happening or being the case. In finance, probability refers to the likelihood that a particular outcome or event will occur, often in the context of investment risk. |
| Uncertainty |
The state of being uncertain; doubt; hesitation. In finance, uncertainty refers to the level of doubt or unknowns associated with a particular investment or financial decision. |
| Variance |
The fact or quality of being different, divergent, or inconsistent; a discrepancy between two or more things. In finance, variance refers to the deviation of an investment's actual performance from its expected performance. |
| Volatility |
Liability to change rapidly and unpredictably, especially for the worse. In finance, volatility refers to the frequency and severity of changes in an investment's value. |
| Hedging |
The practice of using financial instruments or other strategies to reduce or manage investment risk. In finance, hedging can involve taking an offsetting position in a different investment or asset to reduce the risk of losses in the original investment. |
| Derivatives |
Financial instruments or contracts whose value is derived from an underlying asset or group of assets, such as stocks, currencies, or commodities. In finance, derivatives can be used to reduce or manage risk, but can also be highly complex and risky themselves. |
| Diversification |
The practice of investing in a variety of different investments or asset classes in order to reduce the risk of loss. In finance, diversification can involve investing in different stocks, bonds, and other assets. |
| Liquidity |
The ability to convert an asset into cash quickly and easily. In finance, liquidity refers to the ease with which an investor can buy or sell an investment without affecting its price. Highly liquid investments are more desirable because they are easier to sell if needed, whereas illiquid investments can be difficult to sell and may therefore carry more risk. |
| Yield |
The income return on an investment, often expressed as a percentage of the investment's total value. In finance, yield can refer to the interest or dividends paid on a bond or stock, respectively, as well as the total return on an investment including both price appreciation and income. |
| Default risk |
The risk that a borrower or issuer of debt securities will default on their obligations, thereby causing financial loss for the lender or investor. In finance, default risk is often associated with bonds or other debt securities, and is typically reflected in the credit rating assigned to the security. |
| Interest rate |
The amount charged, expressed as a percentage of the principal, by a lender to a borrower for the use of money. In finance, interest rates are among the most important indicators of economic health and are closely monitored by policymakers, businesses, and investors alike. Changes in interest rates can impact borrowing costs, investment returns, and overall economic growth. |
| Market risk |
The risk that the value of an investment will decline due to changes in market factors, such as interest rates, exchange rates, or overall economic conditions. In finance, market risk is a common form of investment risk that can be difficult to predict or control. |
| Credit risk |
The risk that a borrower or issuer of debt securities will fail to make timely payments on their obligations, resulting in financial loss for the lender or investor. In finance, credit risk is often associated with loans, bonds, and other debt securities, and is typically reflected in the credit rating assigned to the borrower or issuer. |
| Duration |
A measure of the sensitivity of a bond or other fixed-income investment to changes in interest rates. In finance, duration can help investors estimate how much the price of a bond is likely to change in response to changes in interest rates. |
| Default |
The failure to fulfill a financial obligation, such as repaying a loan or bond on time. In finance, default can result in significant financial losses for lenders or investors, and is often associated with higher levels of investment risk. |
| Capital risk |
The risk that an investment will lose value or become less profitable due to changes in the economy or market conditions. In finance, capital risk is often associated with stocks and other equity investments, which can experience significant price fluctuations over time. |
| Counterparty |
An individual or entity that enters into a financial transaction with another party. In finance, counterparty refers to the other party in a financial transaction, such as a lender or buyer. Counterparty risk refers to the risk that the other party will fail to fulfill its obligations under the terms of the transaction, resulting in financial loss for the other party. |
| Leverage risk |
The risk that an investor or business will suffer losses due to their use of leverage, or borrowed funds, to finance investments or operations. In finance, leverage risk can be a major contributor to investment losses, as leverage can magnify both gains and losses. Highly leveraged investments may be particularly risky in volatile or uncertain market conditions. |
