The Theory of Financial Risk

The Theory of Financial Risk explains how investments can fluctuate in value and the likelihood of losing money. It highlights that all investments carry some uncertainty, as various factors—like market changes, economic shifts, or company performance—can impact returns. By understanding and measuring these risks, investors can make informed decisions, balancing potential rewards against possible losses. Essentially, it’s about recognizing that risk is inherent in investing and managing it appropriately to achieve financial goals.