Financial risk

Financial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default.[1][2] Often it is understood to include only downside risk, meaning the potential for financial loss and uncertainty about its extent.[3][4]

A science has evolved around managing market and financial risk under the general title of modern portfolio theory initiated by Dr. Harry Markowitz in 1952 with his article, "Portfolio Selection".[5] In modern portfolio theory, the variance (or standard deviation) of a portfolio is used as the definition of risk.