A concise, plain-English map of the risk terms used across RiskMeter. This glossary prioritizes long-term decision making, drawdowns, and behavior under stress.
This glossary covers the core risk vocabulary used in RiskMeter tools and essays.
Loss depth and how long it takes to regain the peak.
How exposure choices create or reduce risk concentration.
Measures that describe variability, sensitivity, and return trade-offs.
Decision rules and behavioral risks that shape outcomes.
Use drawdown and recovery time as your anchor metrics for survivability.
Each term connects to a tool or rule you can apply in real portfolios.
Consistent definitions reduce confusion when discussing risk with others.
Define how much loss you can absorb and how long recovery might take.
Use drift bands and rules to keep risk aligned with your plan.
Track sentiment extremes and avoid chasing late-cycle risk.
Translate loss tolerance into concrete limits and capacity.
Spot sentiment extremes before they drive behavior.
Turn drift into repeatable trade decisions.
The chance of permanent loss or failing to meet your goal.
How widely prices swing over time; noisy, but not always harmful.
The percentage drop from a prior peak to a subsequent trough.
The worst peak-to-trough decline within a specific period.
How long it takes to regain the previous portfolio peak.
Losses require larger gains to recover (e.g., -50% needs +100%).
Low-probability, high-impact losses outside normal ranges.
Spreading exposure across assets to reduce concentrated risk.
Overreliance on a small number of positions, sectors, or themes.
How two assets move together; higher correlation reduces diversification.
Difficulty selling quickly without moving the price.
Borrowed exposure that amplifies both gains and losses.
Sensitivity to broad market moves (beta 1.0 ≈ market).
Statistical measure of volatility around average returns.
Expected extra return for bearing additional risk.
Long-run average outcome, not a guaranteed result.
The maximum loss or volatility you are willing to accept.
How much of a portfolio you allocate to a single position.
Adjusting holdings back to target weights over time.
The gap between current allocation and target allocation.
A tolerance range around target where no action is required.
How much further a position can fall before hitting a max drawdown.
The risk that early losses harm long-term outcomes more than later losses.
The time available before you need the money; longer horizons can absorb more volatility.
The shortfall caused by poor timing or emotion-driven decisions.
The collective mood or positioning of investors; extremes can signal asymmetric risk.
The tendency for returns or valuations to drift back toward a long-term average.
A metric or threshold used to trigger risk actions or reviews.
Using new cash flows to move allocations back to target without selling.
A buffer that reduces the cost of being wrong.
Ready to translate these terms into action? Start with your drawdown tolerance and then explore how market sentiment shifts risk over time.
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