Browse the library
Topic
Risk
51 guides in Finabase Learn
- Alpha The part of a portfolio's return not explained by its market exposure; positive alpha means it beat its risk-adjusted benchmark.
- Asset allocation How a portfolio is divided among asset classes such as stocks, bonds and cash; the main driver of a portfolio's risk.
- Averaging down Buying more of a holding after its price falls, lowering the average cost per share but raising the position's size and risk.
- Bear market A broad decline of 20% or more from a recent high in a major index, usually lasting months and accompanied by pessimism.
- Beta A measure of how much a stock tends to move with the market; a beta of 1.5 means it has moved about 1.5 times as much on average.
- Beta: market beta explained, and what Finabase’s BETA study shows What beta measures, how the regression slope is calculated, why McDonald’s market beta was near zero in 2026, and what Finabase’s 5-bar BETA chart study measures.
- Black swan A rare, extreme and largely unforeseen event with major market consequences, rationalized only after the fact.
- Collateral An asset pledged to secure a loan, which the lender may take if the borrower fails to repay.
- Correction A decline of roughly 10% to 20% from a recent high in a stock or index, shorter and shallower than a bear market.
- Correlation A statistic from -1 to +1 describing how closely two series move together; low correlation is what makes diversification work.
- Credit rating A letter grade from agencies such as S&P, Moody's and Fitch that estimates a borrower's ability to repay its debt.
- Credit Risk The risk that a borrower fails to make promised interest or principal payments in full and on time.
- Default A borrower's failure to make a required interest or principal payment, or to meet other terms of a loan or bond.
- Delta How much an option's price is expected to change for a $1 move in the underlying; also a rough probability of finishing in the money.
- Diversification Spreading money across many investments that do not move in lockstep, so no single loss can do too much damage.
- Diversification: why spreading your investments reduces risk How diversification works through correlation, the difference between risk you can diversify away and market risk you can’t, with worked math and real correlations.
- Drawdown The decline from a portfolio's or price's peak to its subsequent trough, usually stated as a percentage.
- Duration A measure of a bond's price sensitivity to interest rates: a duration of 7 means about a 7% price drop for a one-point rise in yields.
- Emerging markets Economies in transition to developed status, such as India and Brazil, offering higher growth with higher political and currency risk.
- Expected return The probability-weighted average of possible outcomes for an investment; an estimate, not a promise.
- Futures margin and leverage: initial, maintenance and margin calls How futures margin works as a performance bond: initial and maintenance levels, daily variation margin, margin calls and leverage, worked through one crude contract.
- Gamma The rate at which an option's delta changes for a $1 move in the underlying, highest for at-the-money options near expiry.
- Hedge A position taken to offset the risk of another, such as buying a put option to protect a stock holding against a fall.
- History of stock market crashes: every major US drawdown compared The major US stock market crashes and bear markets from 1929 to 2022 in one table: peak, trough, decline and time to recover, with what caused each and what they share.
- Interest-rate risk The risk that rising interest rates lower the price of existing bonds and other rate-sensitive investments.
- Leverage Using borrowed money or derivatives to increase the size of a position, magnifying both gains and losses.
- Liquidity How quickly and cheaply an asset can be bought or sold without moving its price; deep markets have tight spreads.
- Loss aversion: why losses hurt twice as much as gains please What loss aversion is, how researchers measure it, how it drives myopic investing and the break-even trap, what the latest evidence says and how investors work around it.
- Maintenance margin The minimum equity that must be kept in a margin account, at least 25% under FINRA rules; falling below it triggers a margin call.
- Margin call A broker's demand to add cash or securities, or sell holdings, when a margin account's equity falls below the required level.
- Margin calls: when they trigger, how to calculate them, what to do Work out the exact price that triggers a margin call, how much cash or stock cures it, and how Reg T and maintenance calls differ under 2026 US rules.
- Micro-cap stock A stock of a very small company, commonly $50 million to $300 million in market value, often thinly traded and volatile.
- Naked option Selling an option without owning the underlying or an offsetting position; a naked call has theoretically unlimited risk.
- Normalized ATR (NATR): volatility as a percentage of price How NATR turns the Average True Range into a percentage of price, a worked Uber example, comparing volatility across stocks with Micron, and Finabase’s NATR.
- Option Greeks Delta, gamma, theta, vega and rho: measures of how an option's price responds to changes in price, time, volatility and rates.
- Options risks and approval levels: what brokers check and why How US brokers approve options accounts under FINRA Rule 2360, what approval tiers usually allow, and the main risks: leverage, undefined loss and liquidity.
- Penny stock A low-priced, usually small and thinly traded share; the SEC generally treats stocks under $5 as penny stocks, with exceptions.
- Position size How many shares or contracts a trade uses, usually set so that a loss at the stop costs only a fixed slice of the account.
- Risk and return: volatility, drawdowns and the equity premium Why higher expected returns come with bigger swings, how to measure risk with volatility and drawdown, and what five years of SPY and AGG data show.
- Risk premium The extra return investors demand for holding a risky asset instead of a risk-free one, such as the equity risk premium over Treasuries.
- Risk tolerance How much decline in value an investor can stand, financially and emotionally, without abandoning their plan; a key input to asset mix.
- Risk-reward ratio The distance from entry to stop compared with the distance from entry to target, used to judge whether a trade is worth taking.
- Sharpe ratio A measure of risk-adjusted return: how much excess return over the risk-free rate a portfolio earned for each unit of volatility it carried.
- Short selling explained: borrowing, fees, rules and unlimited risk How a short sale works step by step: the locate and close-out rules, borrow fees, dividends you owe, margin, and why a short position has no ceiling on its loss.
- Standard deviation A statistic that measures how widely values spread around their average; in finance, the standard yardstick for an asset’s volatility.
- Stop-limit order An order that becomes a limit order once a trigger price trades, giving control over the fill price at the risk of not filling at all.
- Stop-loss order A standing order to sell (or buy back a short) once the price reaches a set level, used to cap the loss on a position without watching the screen.
- Time horizon and risk tolerance: matching investments to goals How time horizon, risk capacity and risk willingness shape what you invest in, why an emergency fund comes first, and what 33 years of SPY returns show.
- Trailing stop A stop order whose trigger price follows a rising stock by a set dollar amount or percentage, locking in gains while staying in the trend.
- Volatility How much and how quickly a price moves up and down, usually measured as the annualized standard deviation of returns, historical or implied.
- What is a stock? A complete beginner’s guide to shares What owning a share really means, why companies issue stock, how prices are set, how investors make or lose money, and the risks to understand first.
Educational content, not investment advice. Finabase Learn explains how markets and tools work. It does not recommend any security or strategy, and examples are for illustration only. Investing involves risk, including the loss of principal. Rules and figures are for the United States unless stated and can change — check the cited source before you act.