| Probability | A measure of the likelihood that an event will occur.
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| Risk | A measure of uncertainty about the future payoff to an investment, measured over some time horizon and relative to a benchmark. The basis for the second core principle of money and banking: Risk requires compensation.
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| Risk averse investor | Someone who prefers an investment with a certain return to one with the same expected return but any amount of uncertainty.
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| Risk neutral investor | Someone who is indifferent between investments with different risks but the same expected return.
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| Risk-free asset | An investment whose future value is known with certainty.
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| Risk-free rate of return | The rate of return on a risk-free asset.
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| Risk premium | The expected return minus the risk-free rate of return; the payment to the buyer of an asset for taking on risk.
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| Spreading risk | Reducing overall risk by investing in assets whose payoffs are unrelated.
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| Standard deviation | Square root of the variance measure of risk; measures the spread of possible outcomes.
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| Systematic risk | Economywide risk that affects everyone and cannot be diversified.
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| Value at risk | The worst possible loss over a specific time horizon at a given probability; a measure of risk.
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| Variance | The probability-weighted sum of the squared deviations of the possible outcomes from their expected value.
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