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Home > QFINANCE Dictionary > Definition of asymmetric risk

Definition of

asymmetric risk

Risk

investment risk where gains and losses differ widely the risk an investor faces when the gain realized from the move of an underlying asset in one direction is significantly different from the loss incurred from its move in the opposite direction

asymmetric risk - Related Articles

  • Risk Management Revisited

    Best Practice

    To emphasize the point, the value function relating to financial markets differs from the utility function that is generally used in microeconomics in two ways: first, the function is asymmetric, i.e. the behavior exhibited with regard to a gain (being “risk-aversion,” i.e. preferring a definite
    By Duncan Hughes

  • Risk—Perspectives and Common Sense Rules for Survival

    Best Practice

    People differ in their views concerning risk and uncertainty. “Risk” generally implies the potential for loss (gain), an unfavorable (favorable) outcome, or danger (safety). A number of investors would think of risk in a semivariance or asymmetric sense: It’s only risk “if it comes out bad.” More
    By John C. Groth

  • Understanding Capital Structure Theory: Modigliani and Miller

    Checklists

    The Modigliani–Miller theorem states that, in the absence of taxes, bankruptcy costs, and asymmetric information, and in an efficient market, a company’s value is unaffected by how it is financed, regardless of whether the company’s capital consists of equities or debt, or a combination of these

  • Issuing Corporate Debt

    Best Practice

    from its debt and the lending institution underwrites the cost of failure. This suggests that if a firm is able to obtain a large amount of loan financing, it has a large incentive to undertake higher-risk projects because the risk is asymmetric.
    By Steven Lowe

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Definitions of ’asymmetric risk’ and meaning of ’asymmetric risk’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’asymmetric risk’ and other financial terms with our online QFINANCE Financial Dictionary.

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