'Risk is not a meaningful concept unless modified by an adjective. There exist market risk, investment risk, Chapter 11 reorganization risk, credit risk, failure to match maturities risk, hurricane risk, terrorism risk, and so forth; but it not really useful to look at general risk. When risk is discussed in conventional academic finance, the subject is almost always market risk (i.e. fluctuations in market prices). Beta, alpha, and the capital asset pricing model (CAPM) are based on market prices. We ignore market risk and focus on investment risk, especially in distress investing (i.e. the probabilities of something going wrong with the company and/or the securities issued by the company).As often as the word "risk" is used in the infosec profession, there is almost no consistency in how its used, so whenever you hear someone say we should or should not do something because its risky ask them what type of risk? Project risk, financial risk, availability risk, throughput risk, reputation risk, and so on. A little more clarity will go a long way to producing a higher resolution exchange.
For us there is no risk-reward ratio. A risk-reward ratio exists where price is in equilibrium. In that instance, risk and reward for securities are measured by two variables:
1. Quality of the issuer.
2. Terms of the issue.
The higher the quality and the more senior the terms, the less the risk and the smaller the potential for gain. Introducing price turns the risk-reward ratio on its head. The lower the price, the less the risk of loss and the greater the prospect for gain.'