Overview: Upside Risk | ||
Type | ||
Definition | The potential for an investment to do better than your expectations or target. | |
Common Abbreviation | Upside | |
Risk Treatments | ||
Related Concepts |
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What is Upside Risk? John Spacey, updated on
Upside risk is the chance that an asset or investment will increase in value beyond your expectations. This is an example of a positive risk, or the chance that you'll achieve too much of a good thing.The idea of positive risks is somewhat controversial. It is often argued that risk is always a negative thing.
Nevertheless, the concept of upside risk serves a number of useful purposes. For example, it can be a red flag that a particular fund or investment manager is taking excessive risks. Upside risk is also used to model the potential of investments. For example, comparing the upside and downside risk for a particular stock or bond. In other words, upside risk allows you to assess both potential losses and gains with risk approximations.
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