A risk is something that can be measured and included in financial analysis. If it can’t be measured, it’s likely just fear.

Counterparty /Partner Risk

The risk that a party in a financial agreement won’t pay as expected or contracted. This risk is present whenever a borrower is expecting to use future cash flows to pay a current debt.

Credit Risk

The risk that a party in a financial agreement won’t pay as expected or contracted. This risk is present whenever a borrower is expecting to use future cash flows to pay a current debt.

Financial Risk

The risk of consequences that may occur due to changes in the financial environment such as interest rate, currency controls, tax laws, liquidity, secondary market, and changes in cash flow.

Market Risk

The possibility for an investor to experience losses due to factors that affect the overall performance of the market the company is operating in. Often shapes the perceived value of an area of economic activity.

Operating Risk

The risk that an organization’s people, process, or system will adversely impact operations or public opinion. This includes the way an organization is structured, its compensations, HR, and IT practices, its reporting and crisis management practices, safety, working conditions, quality controls, and adherence to regulatory laws.

Political Risk

The risk that an investment’s returns could suffer due to political changes or instability in a country or region.

Reputational Risk

The risk that an organization’s decisions or actions will be perceived as negative by the public, stakeholders, or clients, regardless of validity.

Foreign Exchange Risk

The risk of buying an investment in one currency may lose value when it is sold in another currency.

Regulatory Risk

The risk that a change in laws and regulations will materially impact a security, business, sector or market. This can increase the costs of operating a business, reduce the attractiveness of investment and/or change the competitive landscape.

Rule of Law

The risk that the cost and value of investments may become unpredictable in markets where there is dishonest behavior or fraud conducted by those in power.

Expectations for return are calculated by measuring potential risks over time, and then subtracting the cost of the investment.

Betting Against The Benchmark

A standard against which the performance of a security, mutual fund, or investment manager can be measured; betting against it would be high risk expecting high return

Fixed Return

A return in the form of fixed periodic payments and the eventual return of full principal at maturity


An investment strategy of using financial instruments (such as options) or borrowed money to generate outsized investment returns

Long And Short

Refers to a policy of only holding “long” positions in assets and securities in order to benefit from an increase in prices; the opposite is to be “short”, which means the holder of the short position gains profits when the prices decrease

Return Net Of Fees

Refers to calculation of return or profit received after fees, taxes, and expenses have been paid

Nominal Rate Of Return

The amount of money generated by an investment before expenses such as taxes, investment fees and inflation are factored in

Return Net Of Inflation

The return on an investment after removing the effects of increased pricing and devalued purchasing power of currency caused by inflation. Also known as a real rate of return

Efficient Frontier

A term that describes portfolios that should capture the highest expected return for a defined level of risk or the lowest risk for a given level of expected return

Variable Return

This type of return changes or fluctuates over time, because it is based on an underlying interest rate or market values that change periodically


The expected risk-adjusted return named in the benchmark and seen as a reflection on an asset manager’s success


The volatility in returns of an asset compared to variability in performance over a previous period of time

How do investors understand the relationship between risk and return in the context of one huge variable: TIME?

Exit Horizon

The time period in which investors can liquidate from an investment without penalty


Term that describes the potential of quickly buying or selling an asset or security

Time Value of Money

Concept that assumes that money in the present is worth more than same amount in the future due to its potential earning capacity

Velocity of Capital

The rate at which money is exchanged from one transaction to another, and how much a unit of currency is used in a given period of time

Current Assets

The items listed on a company’s balance sheet that are expected to be converted into cash within one fiscal year

Noncurrent Assets

Long-term assets that a company expects to hold that cannot readily be converted to cash within a fiscal year


A general increase in the price of goods and services over time


A general decline in prices, often caused by a reduction in the supply of money or credit over time


The degree of variation of a trading price of an asset over time. In general the higher the volatility, the higher the risk

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