Risk

Risk refers to the uncertainty surrounding the outcome of an investment, project, or decision, with the potential for loss. In finance, risk is typically measured in terms of volatility, which represents the fluctuations in the value of an asset or portfolio. Different types of risk include market risk, credit risk, liquidity risk, and operational risk. Investors and businesses must assess and manage risk to minimize potential losses and achieve desired returns.

Example

Investing in stocks carries higher market risk compared to bonds due to the volatility in stock prices, but it also offers the potential for higher returns.