Risk curve,

Definition of Risk curve:

1. The risk curve can be used to display the relative risk and return of similar or dissimilar assets. Typically, the x-axis (vertical) represents risk and the y-axis (horizontal) represents average return. Generally speaking, the curve balloons when the underlying item offers greater returns and contracts when it offers lower returns compared to risk. For example, a relatively “risk free” asset such as a 90-day Treasury bill will be positioned lower-left on the chart while an asset such as a leveraged ETF or an individual stock with a wide range of historical gain and loss but also a higher average return will be proportionately to the right and higher up on the chart.

2. A display of two plotted variables on a graph, where the financial risk represented along the vertical axis and the financial reward along the horizontal axis. The curve indicates the type of risk involved, either allowable risk, critical risk or catastrophic risk.

3. The risk curve is a two-dimensional display creating a visualization of the relationship between risk and return of one or more assets. The risk curve can contain multiple data points representing different assets and is used to display data in mean-variance analysis which is central to understanding the relative risk and return of different asset classes and categories in portfolios and the Capital Asset Pricing Model.