Financial risk

Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default.[1][2] Often it is understood to include only downside risk, meaning the potential for financial loss and uncertainty about its extent.[3][4]

A science has evolved around managing market and financial risk under the general title of modern portfolio theory initiated by Harry Markowitz in 1952 with his article, "Portfolio Selection".[5] In modern portfolio theory, the variance (or standard deviation) of a portfolio is used as the definition of risk.

  1. ^ "Financial Risk: Definition". Investopedia. 2018-03-22. Retrieved 1 October 2011.
  2. ^ "In Wall Street Words". Credo Reference. 2003. Retrieved 1 October 2011.
  3. ^ McNeil, Alexander J.; Frey, Rüdiger; Embrechts, Paul (2005). Quantitative risk management: concepts, techniques and tools. Princeton University Press. pp. 2–3. ISBN 978-0-691-12255-7.
  4. ^ Horcher, Karen A. (2005). Essentials of financial risk management. John Wiley and Sons. pp. 1–3. ISBN 978-0-471-70616-8.
  5. ^ Markowitz, H.M. (March 1952). "Portfolio Selection". The Journal of Finance. 7 (1): 77–91. doi:10.2307/2975974. JSTOR 2975974.

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