Summary: Risk concerns the deviation of one or more results of one or more future events from their expected value. Technically, the value of those results may be positive or negative. However, general usage tends to focus only on potential harm that may arise from a future event, which may accrue either from incurring a cost (“downside risk”) or by failing to attain some benefit (“upside risk”).

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Financial markets are becoming increasingly sophisticated in pricing, isolating, repackaging, and transferring risks. Tools such as derivatives and securitization contribute to this process, but they pose their own risks. The failure of accounting and regulation to keep abreast of developments introduces yet more risks, with occasionally spectacular consequences.

Practical applications — including risk limits, trader performance-based compensation, portfolio optimization, and capital calculations–all depend on the measurement of risk. In the absence of a definition of risk, it is unclear what, exactly, such measurements reflect. With financial decisions hanging in the balance, debates flare on trading floors and in industry magazines…

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Towards the development of an evolutionarily valid domain-specific risk-taking scale

From an evolutionary perspective, human risk-taking behaviors should be viewed in relation to evolutionarily recurrent survival and reproductive problems. In response to recent calls for domain-specific measures of risk-taking, we emphasize the need of evolutionarily valid domains. We report on two studies designed to validate a scale of risky behaviors in domains selected from research and theory in evolutionary psychology and biology, corresponding to reoccurring challenges in the ancestral environment. Behaviors were framed in situations which people would have some chance of encountering in modern times. We identify five domains of risk-taking: between-group competition, within-group competition, mating and resource allocation for mate attraction, environmental risks, and fertility risks.

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