Risk is the probability that actual results will differ from expected results. In the Capital Asset Pricing Model (CAPM), risk is defined as the volatility of returns. Risk takes on many forms but is broadly categorized as the chance an outcome or investment's actual return will differ from the expected outcome or return. Risk and risk discussions are often hampered by inconsistent terminology and a high degree of subjectivity. To overcome this, we need to understand what we mean when we ask ‘what is risk?… 1. Risk: Definition Intuitively, risk is the possibility that we will not get what we expect. However, if we want to quantify risk, a good starting point would be to define the term more precisely. But here we stumble on a roadblock – even though, living in an uncertain world, we all have an intuitive understanding of risk, there is no single, universally accepted definition.
