- Risk Assessment
- The process of determining the likelihood that a specified negative event will occur. Investors and business managers use risk assessments to determine things like whether to undertake a particular venture, what rate of return they require to make a particular investment and how to mitigate an activity’s potential losses.
Examples of formal risk assessment techniques and measurements include conditional value at risk-cVaR (used by portfolio managers to reduce the likelihood of incurring large losses); loan-to-value ratios (used by mortgage lenders to evaluate the risk of lending funds to purchase a particular property); and credit analysis (used by lenders to analyze a potential client’s financial data to determine whether to lend money and if so, how much and at what interest rate).
Investment dictionary. Academic. 2012.
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